Self Employment Tax Lawyers in Federal Way
In the U.S., Federal Way, Washington included, almost everyone who is employed during most of their adult life is qualified for Social Security and Medicare benefits when they retire. These programs are supported by taxes deducted from the paychecks of most employees.
Individuals who are self-employed are still accountable for these taxes, and are responsible for figuring out how much they owe.
Normally, it's the employer who makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to take these matters, making it pretty simple for them. But, if you are self-employed, it's up to you to accurately determine what you have to pay in self-employment taxes
Self-Employment tax obligations in Federal Way, Washington
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 larger than per year.
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, basically doubling the amount of money that's contributed to these funds on the employee's behalf.
However, the self-employed in Federal Way, Washington are responsible for making the employer AND employee contributions to those programs, basically doubling what they would have to pay if they were employed by someone else.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds per year in Federal Way, Washington. 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 Federal Way, Washington Tax Attorney Help?
If you are self-employed in Federal Way, it's necessary that you keep good records of your income and expenses, because a tax attorney will only be able to assist you to the extent that you help yourself.
Therefore, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a reliable tax attorney in Federal Way, Washington can assist you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more severe legal and financial issues.