Self Employment Tax in Livingston, California
In Livingston, California, there are particular taxes that are enforced 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 confirm that you don't pay more or less than you are obligated to.
Normally, 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 Livingston, 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.
Individuals 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 obtaining, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.
But, if you are self-employed in Livingston, California, you are accountable to pay both the employee and employer share of the employment tax. Basically, this means that the employment tax for self-employed individuals is double what it would be for regular employees.
In Livingston, California, self-employed business owners pay a self-employment tax rate of 15.3%. This is, of course, separate from, and additional to, whatever they pay in income tax. In an effort to partially offset this further tax burden, half of what one pays in self-employment taxes can be deducted from their income when filing their income taxes. This means that the self employed pay income taxes on, at most, 92% of their income. And it's probably less, thanks to all the other deductions they might qualify for. This deduction lowers the effective self-employment tax rate to 14%, rather than the "official" rate of over 15%.
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Can a Livingston, California Tax Attorney Help?
If you are self-employed in Livingston, it's extremely important for you to be diligent in keeping records of your income and expenses, to ensure that you pay all the self-employment taxes that you owe (and also to make sure you don't over-pay). You may one day need a tax attorney to assist you with a legal issue, and they can help you far more efficiently if you are able to quickly present them with all the relevant information.
If you have any difficulty calculating your self-employment tax liability, an accomplished Livingston, California tax attorney would likely have very little trouble assisting you figure it out. A seasoned lawyer can also give you practical legal advice, which can help you avoid more significant tax law issues in the future, by dealing with them before they become problematic.