Self Employment Tax in Concord, California
In Concord, California, there are specific taxes that are placed 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 Concord, 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.
Employees in a regular employer/employee relationship do enjoy one substantial 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 essentially doubles your contribution to these programs, without doubling their financial burden on you.
But, if you are a self-employed business owner in Concord, 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 self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Concord, 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 Concord, California Tax Attorney Help?
If you are self-employed in Concord, it's imperative that you keep good records of your income and expenses, because a tax attorney will only be able to advise you to the extent that you help yourself.
Thus, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a knowledgeable tax attorney in Concord, California can advise you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more significant legal and financial issues.