24 Oct How to understand your earnings and taxes?
I had the pleasure of sitting down with Michael Tumminia, who is a CPA with Karen Rand Associates (KRA) in New York. His company, which he purchased 12 years ago, processes a lot of household payroll, so I figured he would be the best source to educate RCG’s candidates on saving and payroll.
I find that most of my candidates do not have an understanding of how they are paid and the complexities of taxes. I was hoping you could share some of your knowledge with my candidates to help educate them. So, to start with, what clientele do you service at KRA?
Mostly self employed people. We work with a lot of Models, Social Media Influencers and Business Owners with 0-15 employees. We also handle a bunch of non-profits and affluent families. We do not do what you would call a typical formal family office, but we run their personal lives like one.
What is your biggest piece of advice for your clients?
Being financially successful is not tied to what you earn, it is what you spend
The first thing Michael suggested was that everyone should be on payroll. He also suggests having an employment agreement that spells of employment. We could not agree more.
Here are some of the benefits of payroll:
- Your taxes are withheld
- Employer contributes to your Social security and Medicare
- Employer contributes to an unemployment fund that you can apply for if you are unemployed (if you qualify)
- You are usually covered by disability and workers compensation insurance
- You have verifiable income and legal employment history (i.e., applying for a loan or credit card, confirming work history, etc)
Here is a overview of your taxes:
Who do we pay?
- The State Government
- Social security -6.2% of your income up to $132,900. Employer also pays the same amount.
- Medicare – 1.45% of your income (no cap).
- Disability contribution
- Paid family leave
Now, let’s talk about how to make smart financial choices in order to save for your future.
- Develop a spending plan so you know what it costs for you to live.
- Live within your means
- Set goals for yourself (i.e., pay off debt, save for an apartment or to invest, plan for your retirement)
- Restrict your use of credit cards
- Make an annual retirement contribution (up to $6,000 in an IRA for 2019)
If you had one word of advice for a domestics, what would it be?
That is the million dollar question. Figure out how much you need to take home. Let’s say for an example the employee wants to net $25/hr. They need to figure out their tax profile and what they need in gross pay. There are plenty of online calculators that can help you come up with that amount. You just need to type in your details such as if you are married, number of children, etc. After you fill out this information, it will tell you how much gross pay you need to net $25/hr.
Michael, Thank you so much for your time. I would like to also add for any of my client’s that have a need for domestic payroll services, KRA offers these services