Self Employment Tax in Coachella, California
In Coachella, California, there are particular taxes that are imposed on employees, which are deducted from their paychecks. The generally 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 clearly how much you owe, to ensure that you don't pay more or less than you are obligated to.
Normally, 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 Coachella, California
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are required 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 considerable 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 basically doubles your contribution to these programs, without doubling their financial burden on you.
However, if you're self employed in Coachella, California, or anywhere else, you are obligated to make the employee AND employer contributions to Social Security and Medicare, basically doubling your employment tax liability.
Self-employed workers in Coachella, California pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. However, half of whatever they end up paying in self-employment tax is deductible from income tax. This basically creates a tax deduction of nearly 8% of one's income, requiring you to only pay taxes on 92% of what you earn. Additional tax deductions may lower that number further. When this deduction is taken into account, the self-employment tax rate is effectively 14%, as opposed to over 15%.
Find a Coachella Lawyer that Specializes in Your Area of Need:
Can a Coachella, California Tax Attorney Help?
If you work for yourself in Coachella, you have to stay on top of your self-employment taxes, to avoid facing severe legal and financial issues later on. This means you need to keep superb records of all your income and expenses, in case you need to seek the advice of a tax attorney: the more information you can provide your lawyer, the better he or she can help you.
Therefore, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a reliable tax attorney in Coachella, California can assist you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more severe legal and financial issues.