Self Employment Tax in Gridley, California
In Gridley, California, there are specific taxes that are imposed on employees, which are deducted from their paychecks. The typically well-known employment taxes are the Medicare and Social Security tax, for which a small percentage of every employee's paycheck is deducted.
It's extremely important to know that, if you are self-employed, you still have to pay those taxes, and it's also up to you to figure out precisely how much you owe, to ensure that you don't pay more or less than you are obliged to.
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 Gridley, California
If you primarily work as an independent contractor, or are the owner of a sole proprietorship, you have to pay what's commonly referred to as the "self-employment tax," if your annual income from self-employment is over $400.
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 $100 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.
However, if you're self employed in Gridley, California, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
Currently, the self-employment tax rate in the United States is 15.30% of all income earned from self-employment in Gridley, California. However, half of your hypothetical self-employment tax liability can be deducted from your income. This means that you only pay self-employment tax on about 92% of your income, which creates an effective self-employment tax rate of just over 14%.
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Can a Gridley, California Tax Attorney Help?
If you're self-employed in Gridley, you need to keep accurate records of all your income and expenses from the operation of your business. This will make it much easier for you to calculate your taxes when they come due, and it will make it easier for a tax attorney to give you good, useful advice, should you eventually need it.
Anyone having difficulty with figuring out what they owe in self-employment taxes in Gridley, California should seek the assistance of a knowledgeable tax attorney. Most tax attorneys also have a good familiarity of accounting, so making this determination probably won't be too hard for them. And on top of that, a skilled tax attorney can give you objective and useful legal advice, which can help prevent more serious issues from rising in the future.