Self Employment Tax in Mammoth Lakes, California
In Mammoth Lakes, California, there are particular taxes that are levied on employees, which are deducted from their paychecks. The generally 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 clearly how much you owe, to confirm that you don't pay more or less than you are obligated to.
Normally, 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 Mammoth Lakes, 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.
Individuals who are not self-employed, and work for another person or company, have their contributions to Medicare and Social Security matched by their employers. This means that these programs are receiving, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.
But, if you're self employed in Mammoth Lakes, California, or anywhere else, you are obligated to make the employee AND employer contributions to Social Security and Medicare, basically doubling your employment tax liability.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Mammoth Lakes, California. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly reduced 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%.
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Can a Mammoth Lakes, California Tax Attorney Help?
If you're self-employed in Mammoth Lakes, you need to keep complete 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 simpler for a tax attorney to give you good, useful advice, should you eventually need it.
That said, if you are encountering trouble figuring out clearly how much self-employment tax you owe in Mammoth Lakes, California, a competent tax attorney shouldn't have any trouble helping you on that front. Likewise, if you end up in a dispute with the government over your self-employment tax requirement, a good tax attorney can give you the best possible chance of getting a favorable result.