Self Employment Tax Lawyers in Greenwood
In the U.S., including in Greenwood, South Carolina, taxes are imposed on employees, which are usually 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 liable for those taxes, and it's your responsibility to figure out what you 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 Greenwood, South Carolina
If you primarily work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's commonly referred to as the "self-employment tax," if your annual income from self-employment is over .
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.
However, if you are self-employed in Greenwood, South Carolina, you are liable to pay both the employee and employer share of the employment tax. Effectively, this means that the employment tax for self-employed individuals is double what it would be for regular employees.
Self-employed workers in Greenwood, South Carolina pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. However, 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. Additional 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 Greenwood, South Carolina Tax Attorney Help?
If you are self-employed in Greenwood, it's extremely important for you to be diligent in keeping records of your income and expenses, to ensure that you pay all the self-employment taxes that you owe (and also to make sure you don't over-pay). You may one day need a tax attorney to help you with a legal issue, and they can help you far more effectively if you are able to quickly provide them with all the relevant information.
With all that said, if you are having difficulty determining just how much money you owe in Medicare and Social Security taxes from self-employment in Greenwood, South Carolina, 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.