Self Employment Tax in Monrovia, California
In Monrovia, California, there are particular taxes that are levied 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 makes all these calculations, and the employee doesn't have to think about it. Most larger employers have payroll departments to take these matters, making it pretty simple for them. But, if you are self-employed, it's up to you to accurately determine what you have to pay in self-employment taxes
Self-Employment tax obligations in Monrovia, California
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are required to pay the self-employment tax if your total income from self-employment exceeds $400 per year.
For people who are employed by another person or company, the employer normally matches the employee's contributions to Medicare and Social Security. This basically means that, when you look at your Medicare and Social Security tax statements on your paychecks, you can know that those programs are actually getting double what's shown there - with your employer covering the other half.
But, the self-employed in Monrovia, California are responsible for making the employer AND employee contributions to those programs, basically doubling what they would have to pay if they were employed by someone else.
Currently, the self-employment tax rate in the United States is 15.30% of all income earned from self-employment in Monrovia, California. Nonetheless, half of your hypothetical self-employment tax liability can be deducted from your income. This means that you only pay self-employment tax on about 92% of your income, which creates an effective self-employment tax rate of just over 14%.
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Can a Monrovia, California Tax Attorney Help?
If you're self-employed in Monrovia, you need to keep complete 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 Monrovia, California should seek the help of a seasoned 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 egregious issues from forming in the future.