Self Employment Tax Lawyers in Paoli
In the U.S., including in Paoli, Pennsylvania, taxes are imposed on employees, which are typically deducted from their paychecks. The ones that most people are familiar 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.
It's important to note that if you are self-employed, you're still responsible for those taxes, and it's your responsibility to figure out what you owe.
Most frequently, employers handle all of these calculations. With regular salaried and hourly employees, this is an easy process, and any decent payroll computer software can do it automatically. However, if you work for yourself, it is your responsibility to figure out precisely what you owe.
Self-Employment tax obligations in Paoli, Pennsylvania
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obliged to pay the self-employment tax if your total income from self-employment exceeds per year.
Employees in a regular employer/employee relationship do enjoy one substantial perk that the self-employed do not: their Social Security and Medicare contributions are matched by their employers. So, if you pay in Social Security and Medicare taxes with every paycheck, your employer has to match that. This essentially doubles your contribution to these programs, without doubling their financial burden on you.
However, if you're self employed in Paoli, Pennsylvania, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds per year in Paoli, Pennsylvania. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly lower income tax bill, which partially offsets this additional tax burden. It essentially means that the self-employment tax only applies to 92% of your income, as opposed to all of it. This means that your effective self-employment tax rate is about 14%, as opposed to over 15%.
Can a Paoli, Pennsylvania Tax Attorney Help?
Self-employed individuals in Paoli 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.
That said, if you are having trouble figuring out precisely how much self-employment tax you owe in Paoli, Pennsylvania, a competent tax attorney shouldn't have any trouble helping you on that front. Likewise, if you end up in a dispute with the government over your self-employment tax obligation, a good tax attorney can give you the best possible chance of getting a favorable result.