Self Employment Tax in Brawley, California
In Brawley, 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 does all the calculations, determining 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 ensure that your figures are accurate.
Self-Employment tax obligations in Brawley, 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.
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, the self-employed in Brawley, California are responsible for making the employer AND employee contributions to those programs, effectively doubling what they would have to pay if they were employed by someone else.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Brawley, 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 Brawley, California Tax Attorney Help?
If you are self-employed in Brawley, it's essential that you keep good records of your income and expenses, because a tax attorney will only be able to help you to the extent that you help yourself.
If you have any difficulty calculating your self-employment tax liability, an experienced Brawley, 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 serious tax law issues in the future, by dealing with them before they become problematic.