Self Employment Tax Lawyers in Englewood Cliffs

In Englewood Cliffs, New Jersey, a few different taxes are levied on employees, and subtracted from their gross pay during each pay period. The examples that most people are acquainted with are the taxes imposed to fund Medicare and Social Security, which get their funding mostly from these relatively small pay deductions.

It's essentiall to be aware of one fact: if you're self-employed, you still have to pay these taxes. And it's your responsibility (or the responsibility of someone you hire for this purpose) to figure out exactly how much you owe.

Typically, the employer makes all the necessary calculations and deductions from a person's paycheck. If you are self-employed, however, you are required to make this determination, and to ensure that it's accurate.

Self-Employment tax obligations in Englewood Cliffs, New Jersey

If you are an independent contractor, or run a sole proprietorship (a company which you own, and which is not incorporated as a separate legal entity), you must pay the so-called "self-employment tax" if your income from self-employment is greater than per year.

Workers who are employed by someone else enjoy at least one perk that the self-employed do not: their employer matches their Social Security and Medicare contributions, effectively doubling the amount of money that's contributed to these funds on the employee's behalf.

But, the self-employed in Englewood Cliffs, New Jersey are responsible for making the employer AND employee contributions to those programs, effectively doubling what they would have to pay if they were employed by someone else.

Self-employed workers in Englewood Cliffs, New Jersey 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 effectively 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 Englewood Cliffs, New Jersey Tax Attorney Help?

If you are self-employed in Englewood Cliffs, it's essential that you keep good records of your income and expenses, because a tax attorney will only be able to help you to the extent that you help yourself.

With all that said, if you are having difficulty deciding just how much money you owe in Medicare and Social Security taxes from self-employment in Englewood Cliffs, New Jersey, and keep good financial records, it should be relatively easy for a decent tax attorney to help you. And, if you end up facing a more serious legal issue over your self-employment tax liability, a tax attorney may prove to be invaluable.