Self Employment Tax Lawyers in Palmhurst

In the U.S., including in Palmhurst, Texas, 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.

But what if you're self-employed? You're still obliged to pay these taxes, since you will also be eligible for those retirement programs. It's also your responsibility to determine what your tax liability is.

Typically, it's the employer who does all the calculations, determining what deductions need to be made from a worker's paycheck to cover his or her tax liability. But if you are your own boss, you have to do this, and ensure that your figures are accurate.

Self-Employment tax obligations in Palmhurst, Texas

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.

But, if you are a self-employed business owner in Palmhurst, Texas, you are liable for both the employee and employer contributions to Medicare and Social Security. This basically doubles your self-employment tax rate.

The total self-employment tax (note that this is completely distinct from the income tax) is set at 15.3%, if your income from self-employment in Palmhurst, Texas exceeds . However, half of this tax is deducted from your income, for income tax purposes. Thus, this means that, at most, the self-employed only have to pay income on 92% of their total income, and that amount may be lowered with additional deductions for which you may be eligible. This means that, essentially, the self-employment tax rate is only 14%, as opposed to 15.3%

Can a Palmhurst, Texas Tax Attorney Help?

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

If you have any difficulty calculating your self-employment tax liability, an efficient Palmhurst, Texas tax attorney would probably have very little trouble helping you figure it out. A knowledgeable lawyer can also give you practical legal advice, which can help you avoid more serious tax law issues in the future, by dealing with them before they become problematic.