Self Employment Tax in Pittsburg, California
In Pittsburg, 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 makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to oversee 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 Pittsburg, California
If you are an independent contractor, or run a sole proprietorship (a company which you own, and which is not incorporated as a separate legal entity), you must pay the so-called "self-employment tax" if your income from self-employment is higher than $400 per year.
For usual employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This essentially means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
But, if you are a self-employed business owner in Pittsburg, California, you are liable for both the employee and employer contributions to Medicare and Social Security. This basically doubles your self-employment tax rate.
The total self-employment tax (note that this is completely distinct from the income tax) is set at 15.3%, if your income from self-employment in Pittsburg, California exceeds $400. However, half of this tax is deducted from your income, for income tax purposes. Thus, this means that, at most, the self-employed only have to pay income on 92% of their total income, and that amount may be lowered with additional deductions for which you may be eligible. This means that, essentially, the self-employment tax rate is only 14%, as opposed to 15.3%
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Can a Pittsburg, California Tax Attorney Help?
Self-employed individuals in Pittsburg must ensure that they keep good, accurate 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 advise you with your legal tax concerns.
If you have any difficulty calculating your self-employment tax liability, an efficient Pittsburg, California tax attorney would probably have very little trouble helping you figure it out. A knowledgeable lawyer can also give you practical legal advice, which can help you avoid more serious tax law issues in the future, by dealing with them before they become problematic.