Self Employment Tax in Oroville, California
In Oroville, California, there are certain taxes that are imposed 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 makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to handle these matters, making it pretty simple for them. But, if you are self-employed, it's up to you to accurately determine what you have to pay in self-employment taxes
Self-Employment tax obligations in Oroville, California
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 $400 per year.
Employees in a regular employer/employee relationship do enjoy one significant 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 effectively doubles your contribution to these programs, without doubling their financial burden on you.
However, if you're self employed in Oroville, 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.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Oroville, California. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly lower 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 Oroville, California Tax Attorney Help?
If you're self-employed in Oroville, you need to keep thorough 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 Oroville, California 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 serious issues from arising in the future.