Self Employment Tax Lawyers in Bryn Mawr
In the U.S., including in Bryn Mawr, Pennsylvania, taxes are enforced on employees, which are usually deducted from their paychecks. The ones that most people are acquainted with are the Medicare and Social Security taxes. The idea is that workers pay into these programs during their entire working lives, and then enjoy the benefits they provide once they retire.
Individuals who are self-employed are still liable for these taxes, and are responsible for figuring out how much they owe.
In most cases, employers make all the necessary calculations to determine how much needs to be deducted from an employee's check to pay these taxes. It's usually very simple, and any decent payroll software can automate this process. But the self-employed are responsible for figuring this out for themselves, or hiring an accountant to do it.
Self-Employment tax obligations in Bryn Mawr, Pennsylvania
If you own a sole-proprietorship, or work mainly as an independent contractor, you need to pay the "self-employment tax" if you derive any significant amount of income from self-employment. You must pay these taxes if your income from self-employment is more than annually.
For ordinary employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This effectively means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
However, if you are a self-employed business owner in Bryn Mawr, Pennsylvania, you are responsible for both the employee and employer contributions to Medicare and Social Security. This essentially doubles your self-employment tax rate.
In Bryn Mawr, Pennsylvania, self-employed business owners pay a self-employment tax rate of 15.3%. This is, of course, separate from, and additional to, whatever they pay in income tax. In an effort to partially offset this further tax burden, half of what one pays in self-employment taxes can be deducted from their income when filing their income taxes. This means that the self employed pay income taxes on, at most, 92% of their income. And it's probably less, thanks to all the other deductions they might qualify for. This deduction lowers the effective self-employment tax rate to 14%, rather than the "official" rate of over 15%.
Can a Bryn Mawr, Pennsylvania Tax Attorney Help?
If you work for yourself in Bryn Mawr, you have to stay on top of your self-employment taxes, to avoid facing serious legal and financial issues later on. This means you need to keep excellent 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 experienced Bryn Mawr, Pennsylvania tax attorney would likely have very little trouble assisting you figure it out. A reputable lawyer can also give you practical legal advice, which can help you avoid more significant tax law issues in the future, by dealing with them before they become problematic.