Self Employment Tax in Carson, California
In Carson, 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 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 Carson, California
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obliged to pay the self-employment tax if your total income from self-employment exceeds $400 per year.
Persons 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 getting, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.
However, the self-employed in Carson, California are responsible for making the employer AND employee contributions to those programs, essentially 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 Carson, 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 Carson, California Tax Attorney Help?
If you're self-employed in Carson, you need to keep accurate 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.
That said, if you are having trouble figuring out precisely how much self-employment tax you owe in Carson, 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 obligation, a good tax attorney can give you the best possible chance of getting a favorable result.