Self Employment Tax in Malibu, California
In Malibu, California, there are particular taxes that are placed 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 Malibu, 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.
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 acquiring, on your behalf, twice as much money as what's deducted for your paycheck, with your employer covering the other half.
However, if you're self employed in Malibu, 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.
The self-employment tax rate is 15.3% of all self-employment income, assuming your income from self-employment exceeds $400 per year in Malibu, 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 Malibu, California Tax Attorney Help?
If you are self-employed in Malibu, it's necessary that you keep good records of your income and expenses, because a tax attorney will only be able to assist you to the extent that you help yourself.
Anyone having difficulty with figuring out what they owe in self-employment taxes in Malibu, California should seek the help of a brilliant tax attorney. Most tax attorneys also have a good understanding of accounting, so making this determination probably won't be too hard for them. And on top of that, a qualified tax attorney can give you objective and useful legal advice, which can help prevent more severe issues from forming in the future.