Self Employment Tax Lawyers in Woodland
In Woodland, 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.
In most cases, employers make all the necessary calculations to determine how much needs to be deducted from an employee's check to pay these taxes. It's typically very simple, and any decent payroll software can automate this process. But the self-employed are liable for figuring this out for themselves, or hiring an accountant to do it.
Self-Employment tax obligations in Woodland, California
If you work as an independent contractor, or operate a sole proprietorship, you are deemed to be "self employed." You are obliged to pay the self-employment tax if your total income from self-employment exceeds per year.
For people who are employed by another person or company, the employer typically matches the employee's contributions to Medicare and Social Security. This essentially 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.
However, if you're self employed in Woodland, California, or anywhere else, you are obliged to make the employee AND employer contributions to Social Security and Medicare, essentially doubling your employment tax liability.
Self-employed workers in Woodland, California pay a self-employment tax rate of 15.3% of their income that's derived from self-employment. However, half of whatever they end up paying in self-employment tax is deductible from income tax. This essentially creates a tax deduction of nearly 8% of one's income, requiring you to only pay taxes on 92% of what you earn. Additional tax deductions may lower that number further. When this deduction is taken into account, the self-employment tax rate is effectively 14%, as opposed to over 15%.
Can a Woodland, California Tax Attorney Help?
Self-employed individuals in Woodland must ensure that they keep good, accurate financial records. This makes it much easier to determine what you owe, and, if you need a tax attorney, it makes it easier for them to advise you with your legal tax concerns.
Thus, if you have some trouble figuring out what you owe in self-employment taxes, for whatever reason, chances are good that a knowledgeable tax attorney in Woodland, California can advise you with much trouble, and can provide you with good legal and financial advice, which can help you head off much more significant legal and financial issues.