Self Employment Tax in La Verne, California
In La Verne, California, there are certain taxes that are levied 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 confirm that you don't pay more or less than you are required to.
Usually, it's the employer who does all the calculations, deciding 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 confirm that your figures are accurate.
Self-Employment tax obligations in La Verne, 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 everybody who makes more than $400 per year from self-employment.
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, effectively doubling the amount of money that's contributed to these funds on the employee's behalf.
However, if you are a self-employed business owner in La Verne, California, you are responsible for both the employee and employer contributions to Medicare and Social Security. This essentially doubles your self-employment tax rate.
Currently, the self-employment tax rate in the United States is 15.30% of all income earned from self-employment in La Verne, California. Nonetheless, 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 La Verne, California Tax Attorney Help?
If you are self-employed in La Verne, it's extremely important for you to be diligent in keeping records of your income and expenses, to ensure that you pay all the self-employment taxes that you owe (and also to make sure you don't over-pay). You may one day need a tax attorney to help you with a legal issue, and they can help you far more efficiently if you are able to quickly present them with all the relevant information.
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 La Verne, California, 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 serious legal issue over your self-employment tax liability, a tax attorney may prove to be invaluable.