Self Employment Tax in Hughson, California
In Hughson, California, there are certain taxes that are placed on employees, which are deducted from their paychecks. The mostly 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 exactly how much you owe, to ensure that you don't pay more or less than you are required to.
Usually, 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 Hughson, California
If you derive even a small percentage of your income from running your own business, or working as an independent contractor, you have to pay the "self-employment tax." This tax applies to everyone who makes more than $400 per year from self-employment.
For ordinary employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This effectively means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
However, if you're self employed in Hughson, California, 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 Hughson, California 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%.
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Can a Hughson, California Tax Attorney Help?
Self-employed individuals in Hughson must ensure that they keep good, thorough 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 help you with your legal tax issues.
So, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a qualified tax attorney in Hughson, California can help you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more serious legal and financial issues.