Self Employment Tax Lawyers in Potsdam
In Potsdam, New York, 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.
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.
Normally, 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 Potsdam, New York
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 Potsdam, New York, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
Self-employed workers in Potsdam, New York 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 Potsdam, New York Tax Attorney Help?
Self-employed individuals in Potsdam must ensure that they keep good, accurate financial records. This makes it much easier to determine what you owe, and, if you need a tax attorney, it makes it easier for them to advise you with your legal tax concerns.
Thus, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a knowledgeable tax attorney in Potsdam, New York can advise you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more significant legal and financial issues.