Self Employment Tax in San Bernardino County, California
In San Bernardino County, 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 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 San Bernardino County, 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 greater than $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 are self-employed in San Bernardino County, California, you are liable to pay both the employee and employer share of the employment tax. Effectively, this means that the employment tax for self-employed individuals is double what it would be for regular employees.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in San Bernardino County, 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 San Bernardino County, California Tax Attorney Help?
Self-employed individuals in San Bernardino County 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.
If you have any difficulty calculating your self-employment tax liability, an experienced San Bernardino County, California tax attorney would probably have very little trouble helping you figure it out. A good lawyer can also give you practical legal advice, which can help you avoid more severe tax law issues in the future, by dealing with them before they become problematic.