JULY 14TH, 2010
By CPA SAM
Q. I have a full-time and a part-time job with different companies. My employers are both taking out Social Security tax. Is this correct?
A. Good Question! There are several common misconceptions about Social Security withholding from a paycheck. This is probably one of the biggest. The answer is….a resounding YES!!! Each employer of record is required to withholding 6.2% of your taxable wage for Social Security purposes up to the annual limit. That is $106,800 for 2010. Even if you have 5 jobs at once, each employer is required to withhold this amount. Even if you are retired and collecting Social Security and have a job somewhere just for fun, the employer is still required to withhold Social Security tax.
You may ask, “What happens if the income from all my jobs add up to more than that limit? Can I get all my employers to stop withholding Social Security?” The answer is no. You do have the ability to get a refund on your tax return if the total Social Security tax paid during the year was more than the maximum required. That is $6621.60 for 2010. You’ll see this on line 69 of the 1040 form. The biggest drawback to this is that the multiple employers are not permitted to recover the overpaid Social Security. They will match 6.2% up to the limit for everyone regardless whether that employee will be refunded overpaid tax later in the year.
OCTOBER 14TH, 2009
By CPA SAM
During my lunch break, I usually read news articles and opinions from various news sites. One thing that is always fascinating is the paradox of how many people want to be like the various celebrities in the news, yet how out of touch those same celebrities are with real people’s lives. So many magazines at the checkout stand in the grocery store offer “new” ways to attract men or make yourself more attractive, or drop pounds and even change your body in a few easy steps. Unfortunately, nothing in life is that easy whether it be finances, dieting or your career.
As part of a successful personal financial plan, it is important to keep your focus on your ultimate goal, getting out of debt and planning for both unforeseen problems and retirement. It is also important to ignore the temptations around you that try to get you back into your old ways of overspending. I think the current economic climate has taught many Americans that buying on credit is simply not the smart way to go regardless what everyone else is doing. What happens if you lose your job or your income is reduced? A good budget will help you work your way out of debt while still affording a few small “rewards” along the way to keep you motivated. It also provides a bit of accountability
To get started in a budget, the first thing that needs to happen is to stop reading about celebrities and fashion. They make “crazy money” as Angelina Jolie once said for doing very little. They have essentially unlimited resources that the rest of us don’t! Book after book has been written on how stuff and money simply does not bring happiness. I invite you to spend more time with friends and family. Getting to know people and making an impact in someone else’s life is a pursuit that brings lasting rewards. Soon the stuff you bought will be broken or obsolete anyway. Why bother with more of it?
Fashion houses and designers will tell us that our wardrobes all need to be refreshed each season with the latest styles. Why? Is that pair of pants any less useful now that someone else has declared it “out of style?” I know, coming from a CPA (traditionally fashion-challenged people), it’s hard to take fashion advice. Think how much extra money you could put toward paying off debt if your closet didn’t look like a department store! Wearing clothes for more than one year and dressing in classic styles can save hundreds of dollars. Think how much less stress you can have sitting on your couch watching a movie from RedBox ($1) in last year’s jeans and t-shirt with a cup of hot cocoa (6 pack from grocery store for $4). You have created a relaxing quiet evening in without worrying about how you will pay for all the new stuff you just bought.
APRIL 1ST, 2009
By CPA SAM
Q. I own a small business and have 5 employees. I am looking to expand to company and need to offer some kind of retirement plan for my employees. 401(k) plans are really expensive and I don’t know much about SIMPLE plans. What do I choose?
A. This is a very important question for small business owners to think about. When you are ready to start offering benefits to your employees, some types are better suited for larger employers and some are specifically designed for smaller employers. The biggest difference between these types of plans is the testing requirement. In traditional 401(k) plans, employers need to ensure that the plans do not become “top heavy”. That is, key or highly compensated employees are taking advantage of the plan more than regular employees. If a 401(k) plan becomes top heavy, the plan risks losing it’s tax benefits. In a smaller business, an employer may wish to take full advantage of the retirement contributions on behalf of him or herself while employees may not want to or be able to. By removing the testing requirement, you are providing the plan without the risks.
Limits on the SIMPLE plans are a bit lower ($11,500-Simple vs $16,500-traditional for 2009). There are also limits to the amount that an employer can contribute to an employee’s account (3% of employee compensation-Simple vs 25%-traditional). If your employee population reaches 100, that employer is no longer eligible for the SIMPLE type plans.
It is a great idea to offer a retirement savings plan to your employees. As an employer, you can choose to match or not match the contributions which makes the plan that much more valuable. It is a great way to attract and retain the best talent.
DECEMBER 4TH, 2008
By CPA SAM
Q. I have taken a 50% hit on my 401(k) account this year because of the market contraction. I’m thinking of just pulling all the money out and investing in a rental property instead. Is this a good idea? I live in the southwest where real estate has really dropped anyway. I’m not 59.5 yet either. I am in the 35% bracket.
A. Now that is a very defeated person! Anyone who has the slightest bit of risk in their portfolio, 401(k) or not is Read more »
