Self Employment Tax Lawyers in Litchfield

In Litchfield, Minnesota, some taxes are levied 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 Litchfield, Minnesota

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

For people who are employed by another person or company, the employer typically matches the employee's contributions to Medicare and Social Security. This essentially means that, when you look at your Medicare and Social Security tax statements on your paychecks, you can know that those programs are actually getting double what's shown there - with your employer covering the other half.

But, if you're self employed in Litchfield, Minnesota, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.

Currently, the self-employment tax rate in the United States is 15.30% of all income earned from self-employment in Litchfield, Minnesota. Nonetheless, half of your hypothetical self-employment tax liability can be deducted from your income. This means that you only pay self-employment tax on about 92% of your income, which creates an effective self-employment tax rate of just over 14%.

Can a Litchfield, Minnesota Tax Attorney Help?

If you work for yourself in Litchfield, you have to stay on top of your self-employment taxes, to avoid facing significant legal and financial issues later on. This means you need to keep reliable records of all your income and expenses, in case you need to seek the advice of a tax attorney: the more information you can provide your lawyer, the better he or she can help you.

If you have any difficulty calculating your self-employment tax liability, an efficient Litchfield, Minnesota tax attorney would likely have very little trouble assisting you figure it out. A reliable lawyer can also give you practical legal advice, which can help you avoid more egregious tax law issues in the future, by dealing with them before they become problematic.