Self Employment Tax Lawyers in South Houston

In the U.S., including in South Houston, Texas, taxes are enforced on employees, which are normally 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.

But what if you're self-employed? You're still obligated 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, it's the employer who does all the calculations, deciding 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 confirm that your figures are accurate.

Self-Employment tax obligations in South Houston, Texas

If you mainly work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's usually referred to as the "self-employment tax," if your annual income from self-employment is over .

Employees in a regular employer/employee relationship do enjoy one considerable 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 basically doubles your contribution to these programs, without doubling their financial burden on you.

But, if you're self employed in South Houston, Texas, or anywhere else, you are obligated to make the employee AND employer contributions to Social Security and Medicare, basically 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 South Houston, Texas. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly reduced 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 South Houston, Texas Tax Attorney Help?

Self-employed individuals in South Houston must ensure that they keep good, complete 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 assist you with your legal tax contentions.

That said, if you are encountering trouble figuring out clearly how much self-employment tax you owe in South Houston, Texas, 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 requirement, a good tax attorney can give you the best possible chance of getting a favorable result.