What You Need to Know About EDD Tax Information for Independent Contractors
As an independent contractor, you may be familiar with the fact that you’re responsible for paying your own taxes. However, if you’re not aware of the specific taxes you need to pay and the guidelines around the reporting and remittance of those taxes, you could find yourself in hot water with the State of California. In this article, we’ll take a closer look at EDD tax information for independent contractors to help ensure you’re informed and in compliance with state law.
What is EDD Tax?
EDD stands for Employment Development Department, which is a state agency in California responsible for administering payroll taxes and unemployment insurance. For independent contractors, EDD tax applies to the earnings you receive from clients in exchange for your services. This type of tax is commonly referred to as a self-employment tax.
When Do I Need to Pay EDD Tax?
If you make more than $400 in earnings from self-employment, you’re required to pay self-employment tax. Specifically, you need to pay 15.3% of your net income to the Social Security Administration and the Medicare program. Note that this tax is in addition to your federal and state income taxes.
How Do I Report and Remit EDD Tax?
Reporting and remitting EDD tax is a frequently asked question by independent contractors. To make your life easier, EDD provides an online system called e-Services for Business to report and remit your taxes. You’ll need to register for an account and follow the instructions provided to submit your tax information.
What Happens If I Don’t Pay My EDD Tax?
If you fail to pay your EDD tax, the Employment Development Department could take legal action against you. This could result in hefty fines, liens on your property, and even criminal charges.
Conclusion
Now that you know more about EDD tax information for independent contractors, you can take steps to stay informed and in compliance with state law. Remember to keep track of your earnings and set aside funds for your self-employment taxes on a regular basis. And, make sure to report and remit your taxes accurately and in a timely manner to avoid any unnecessary headaches down the road.
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