Bonsai Tax is built just for self-employed workers.
It helps tens of thousands of people across the country save an average of $5,600 on their taxes.
This handy book will guide through best practices to follow when calculating your freelance taxes.
A self employed individual who makes a profit (income minus expenses) of $400 or more will have to pay California self employment tax. This amount of 15.3% covers a Social Security payment of 12.4% and a Medicare payment of 2.9%. Since you don’t have an employer to withhold the tax and make payments for you, it’s up to you as the business owner to look after the California self employment tax.
The California self employment tax is divided into two different calculations. The first is the 12.4% Social Security amount that is paid on a set amount, which in 2020 will be the first $137,700 of your net earnings. The second payment to Medicare is 2.9%, applied against all your combined net earnings. There are some variations if your spouse works for you, you have a family business, or you have a married couples business.
California self employment tax has to be paid on a quarterly basis, if you expect to owe more than $500, you'll have to make payments on:
If you don’t make the payments on that schedule, you could be subject to a penalty.
To pay California self employment tax, you use Form 1040-ES, Estimated Tax for Individuals. To complete the form, you will need your prior year’s tax return, or if you just started your business, you will estimate your annual earnings.