Self Employment Tax Lawyers in Cottonwood Heights

In the U.S., including in Cottonwood Heights, Utah, taxes are enforced on employees, which are typically 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 obliged 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.

Most frequently, employers handle all of these calculations. With regular salaried and hourly employees, this is an easy procedure, and any decent payroll computer software can do it automatically. But, if you work for yourself, it is your responsibility to figure out precisely what you owe.

Self-Employment tax obligations in Cottonwood Heights, Utah

If you are an independent contractor, or run a sole proprietorship (a company which you own, and which is not incorporated as a separate legal entity), you must pay the so-called "self-employment tax" if your income from self-employment is higher than 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 self-employed in Cottonwood Heights, Utah, you are responsible to pay both the employee and employer share of the employment tax. Essentially, this means that the employment tax for self-employed individuals is double what it would be for regular employees.

Self-employed workers in Cottonwood Heights, Utah pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. But, half of whatever they end up paying in self-employment tax is deductible from income tax. This essentially creates a tax deduction of nearly 8% of one's income, requiring you to only pay taxes on 92% of what you earn. Further 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 Cottonwood Heights, Utah Tax Attorney Help?

Self-employed individuals in Cottonwood Heights 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.

With all that said, if you are having difficulty deciding just how much money you owe in Medicare and Social Security taxes from self-employment in Cottonwood Heights, Utah, 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 significant legal issue over your self-employment tax liability, a tax attorney may prove to be invaluable.