Self Employment Tax Lawyers in Lake City

In Lake City, Minnesota, some taxes are enforced on employees, and deducted from their paychecks. Most people are cognizant of the Medicare and Social Security taxes - which fund those two programs by taking a small percentage of every paycheck an employee receives.

But what if you're self-employed? You're still obliged to pay these taxes, since you will also be qualified for those retirement programs. It's also your responsibility to determine what your tax liability is.

Most frequently, employers handle all of these calculations. With regular salaried and hourly employees, this is an easy procedure, and any decent payroll computer software can do it automatically. But, if you work for yourself, it is your responsibility to figure out precisely what you owe.

Self-Employment tax obligations in Lake City, Minnesota

If you mainly work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's usually referred to as the "self-employment tax," if your annual income from self-employment is over .

For usual employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This essentially means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.

But, the self-employed in Lake City, Minnesota are responsible for making the employer AND employee contributions to those programs, essentially doubling what they would have to pay if they were employed by someone else.

Self-employed workers in Lake City, Minnesota pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. But, half of whatever they end up paying in self-employment tax is deductible from income tax. This essentially creates a tax deduction of nearly 8% of one's income, requiring you to only pay taxes on 92% of what you earn. Further tax deductions may lower that number further. When this deduction is taken into account, the self-employment tax rate is effectively 14%, as opposed to over 15%.

Can a Lake City, Minnesota Tax Attorney Help?

If you are self-employed in Lake City, it's extremely important for you to be diligent in keeping records of your income and expenses, to ensure that you pay all the self-employment taxes that you owe (and also to make sure you don't over-pay). You may one day need a tax attorney to advise you with a legal issue, and they can help you far more efficiently if you are able to quickly present them with all the relevant information.

Anyone having difficulty with figuring out what they owe in self-employment taxes in Lake City, Minnesota should seek the assistance of a reliable tax attorney. Most tax attorneys also have a good familiarity of accounting, so making this determination probably won't be too hard for them. And on top of that, a skilled tax attorney can give you objective and useful legal advice, which can help prevent more significant issues from rising in the future.