Self Employment Tax in Holtville, California
In Holtville, California, there are specific taxes that are enforced 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 confirm that you don't pay more or less than you are obliged to.
Typically, it's the employer who does all the calculations, deciding 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 confirm that your figures are accurate.
Self-Employment tax obligations in Holtville, California
If you derive even a small percentage of your income from running your own business, or working as an independent contractor, you have to pay the "self-employment tax." This tax applies to everybody who makes more than $400 per year from self-employment.
For usual employees, Social Security and Medicare payments are made in equal parts by the employee and employer. This essentially means that every employee's contribution to his or her future Medicare and Social Security benefits is matched by the employer.
But, if you're self employed in Holtville, California, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Holtville, California. But half of your self-employment tax liability can be deducted from your income tax. This results in a slightly reduced 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 Holtville, California Tax Attorney Help?
If you're self-employed in Holtville, 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 simpler for a tax attorney to give you good, useful advice, should you eventually need it.
Anyone having difficulty with figuring out what they owe in self-employment taxes in Holtville, California should seek the assistance of a reliable tax attorney. Most tax attorneys also have a good familiarity of accounting, so making this determination probably won't be too hard for them. And on top of that, a skilled tax attorney can give you objective and useful legal advice, which can help prevent more significant issues from rising in the future.