Self Employment Tax Lawyers in Sun Prairie

In the U.S., Sun Prairie, Wisconsin included, almost everyone who is employed during most of their adult life is eligible for Social Security and Medicare benefits when they retire. These programs are supported by taxes deducted from the paychecks of most employees.

It's crucial 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.

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

Self-Employment tax obligations in Sun Prairie, Wisconsin

If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obligated to pay the self-employment tax if your total income from self-employment exceeds per year.

For people who are employed by another person or company, the employer usually matches the employee's contributions to Medicare and Social Security. This effectively means that, when you look at your Medicare and Social Security tax statements on your paychecks, you can know that those programs are actually getting double what's shown there - with your employer covering the other half.

However, if you're self employed in Sun Prairie, Wisconsin, or anywhere else, you are required to make the employee AND employer contributions to Social Security and Medicare, effectively doubling your employment tax liability.

Self-employed workers in Sun Prairie, Wisconsin 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 Sun Prairie, Wisconsin Tax Attorney Help?

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

Anyone having difficulty with figuring out what they owe in self-employment taxes in Sun Prairie, Wisconsin should seek the advice of a good tax attorney. Most tax attorneys also have a good knowledge of accounting, so making this determination probably won't be too hard for them. And on top of that, a competent tax attorney can give you objective and useful legal advice, which can help prevent more severe issues from arising in the future.