Self Employment Tax in Newport Beach, California
In Newport Beach, California, there are certain taxes that are placed on employees, which are deducted from their paychecks. The mostly 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 exactly how much you owe, to ensure that you don't pay more or less than you are required to.
Usually, 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 handle 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 Newport Beach, California
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obligated to pay the self-employment tax if your total income from self-employment exceeds $400 per year.
Workers who are employed by someone else enjoy at least one perk that the self-employed do not: their employer matches their Social Security and Medicare contributions, effectively doubling the amount of money that's contributed to these funds on the employee's behalf.
However, the self-employed in Newport Beach, California are responsible for making the employer AND employee contributions to those programs, effectively 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 Newport Beach, California. However, 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 Newport Beach, California Tax Attorney Help?
If you work for yourself in Newport Beach, you have to stay on top of your self-employment taxes, to avoid facing serious legal and financial issues later on. This means you need to keep excellent records of all your income and expenses, in case you need to seek the advice of a tax attorney: the more information you can provide your lawyer, the better he or she can help you.
If you have any difficulty calculating your self-employment tax liability, an experienced Newport Beach, California tax attorney would probably have very little trouble helping you figure it out. A good 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.