Self Employment Tax in Inglewood, California
In Inglewood, 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 Inglewood, 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 everyone 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 are a self-employed business owner in Inglewood, 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 total self-employment tax (note that this is completely distinct from the income tax) is set at 15.3%, if your income from self-employment in Inglewood, California exceeds $400. However, half of this tax is deducted from your income, for income tax purposes. Thus, this means that, at most, the self-employed only have to pay income on 92% of their total income, and that amount may be lowered with additional deductions for which you may be eligible. This means that, essentially, the self-employment tax rate is only 14%, as opposed to 15.3%
Find a Inglewood Lawyer that Specializes in Your Area of Need:
Can a Inglewood, California Tax Attorney Help?
If you are self-employed in Inglewood, 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.
If you have any difficulty calculating your self-employment tax liability, an efficient Inglewood, California tax attorney would probably have very little trouble helping you figure it out. A knowledgeable lawyer can also give you practical legal advice, which can help you avoid more severe tax law issues in the future, by dealing with them before they become problematic.