You & Your MoneyClass 1, Part 1 – Your Income

International Centerat Catholic Charities Community Services

December 2013Instructor: Virginia Guilford

Class Schedule• Class 1 - Thursday December 5, 3:30 -5 PM– Your Income– Your Taxes

• Class 2 – Thursday December 12, 3:30 -5 PM– Your Budget– Your Bank Accounts

• Class 3 – Thursday December 19, 3:30 -5 PM– Your Credit– Learning More

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Please Be Aware

• This course does not give you professional advice– I am not a lawyer.– I am not an accountant.– I am not a banker.

• This course explains the basic concepts and vocabulary that you need for understanding work, taxes, budgeting, banking and credit.

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Your Income

• Income is generally the money that you receive from your work.

• Your Work– What kind of a worker will you be?– When are you expected to work? – How will you be paid? – What benefits will you receive?

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Kinds of Workers

• Employee Working as an employee means that your pay and

your working conditions are regulated by Federal and State laws about employees.

– Full-Time Employee– Part-Time Employee– Hourly Employee

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Kinds of Workers

• Freelance / Contractor Working as a free-lancer or independent contractor is

like having your own business.

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Kinds of WorkersWorking for Tips

Some workers get no pay at all, or very little pay. The only money they make is from the tips they receive from customers. Although it is not legal, workers in a nail salon may work for tips only. Most waiters and taxi drivers earn only a very small salary, and the majority of the money they make is from tips.

Note: Many restaurants make their wait staff pay if the customer leaves without paying for the meal. This is illegal. If you are a waiter who is required to pay, call the help line at the US Dept of Labor, 866-487-9243 to report your employer.

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Working Hours and Paid Time Off

• Working Hours • Holidays• Sick Days• Vacation

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Working Hours

• A full-time employee in a large corporation generally works 35 or 40 hours a week.

• The traditional hours for work are 9:00 AM to 5:00 PM.

• Part-time workers commonly work less than 20 hours a week.

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Holidays Holidays are days when your company is closed, and

you are not obliged to come to work. • Holidays observed by almost everyone:

– Thanksgiving (the 4th Thursday in November)– Christmas Day (December 25)

• Additional holidays observed by most corporations:– New Year’s Day (January 1)– Memorial Day (last Monday in May)– Independence Day (July 4)– Labor Day (the first Monday in September)

• Other holidays commonly observed here in New York:– Martin Luther King Day (3rd Monday in January)– Presidents’ Day (3rd Monday in February) – Good Friday (Friday before Easter Sunday)– Columbus Day (a holiday in New York State, 2nd Monday in October) – Veterans’ Day (November 11)

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Sick Days• Most companies allow you to stay home but

still be paid if you are sick. • This kind of paid time off is called Sick Pay,

and the days you take off because of being sick are ‘sick days’.

• The number of sick days you can take is different at different companies.

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Vacation

• One or two weeks of paid vacation each year is usual for full-time employees.

• Some companies are closed for a certain time when everyone takes their vacation.

• Some companies require you to schedule your vacation by asking for approval from your manager.

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Personal Days & Family Medical Leave

• Sometimes, a company will give employees two or three paid personal days off in addition to vacation days.

• Large companies are required by the Family Medical Leave Act to provide 12 weeks of unpaid leave for extended family situations, such as illness or the birth of a child.

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Getting Paid

• Minimum Wage• Gross Pay and Net Pay• Payment Method• Pay Periods

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Minimum Wage• The Federal Minimum Wage is currently $7.25 per hour.• States and cities can increase this number.

– In NY State minimum wage is $8.00, increasing to $8.75 as of 2014, and $9.00 in 2015. In NYC minimum wage is the same as NY State, but also requires employers to provide at least 5 paid sick days.

– In Washington State, the minimum wage is $9.19, but in the city of Seatac, Washington, voters just raised the minimum wage to $15.00 per hour

• Not all workers are covered by Minimum Wage laws. – Federal minimum wage laws apply only to larger businesses that do business

across state lines, and also to most hospitals and schools.– Certain very small businesses are not covered– Certain types of work (casual baby sitters, companions) are not covered.

• Certain types of workers have different requirements.– Workers who are tipped. – Agricultural workers, garment workers, hospitality industry workers, fishermen,

newspaper delivery people, etc.15

Gross Pay & Net Pay

• Gross Pay is the total amount you have earned.

• Net Pay is what you actually receive; it is your gross pay minus any amounts that have been withheld, such as:– Taxes– Union Dues– Health Insurance

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Payment Method

• Direct Deposit – your pay is deposited directly into your bank account by your employer.

• Check – your pay is given to you in a check.• Cash – your pay is given to you in cash.

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Pay Periods

• Weekly• Every 2 Weeks• Twice a Month• Monthly• Daily/End of Project

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Benefits

• Benefits are valuable things that you get from your employer in addition to the money that is your salary. – Health Insurance– Life Insurance– Disability Insurance– Workers Compensation– Retirement Savings Contributions– Other Benefits

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Health Insurance

• Health Insurance– Health Insurance rules are changing– Most employers offer health insurance– If it is offered, you may be required to pay some

or all of the costs– Many people hope to get a job that includes a

health insurance benefit

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Life Insurance

• Life Insurance– Typically an employer will offer a life insurance

policy for the amount of your annual salary– Additional multiples of your annual salary might

be available at extra cost to you

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Disability Insurance

• Disability Insurance– Provides some income to you if you are injured so

badly that you cannot work.– Social Security also provides some insurance

against disability.

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Workers Compensation

• Workers Compensation. – A kind of insurance that covers you if you cannot

work because of an injury that happened at work.

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Retirement Savings Contributions

• Retirement Savings Contributions – IRS has rules that determine what percent of your

salary can be put into tax-free retirement savings.– Cannot take out this money until age 59 ½ • Early withdrawal is taxable• Early withdrawal has penalties

• 401k• IRA• Retirement Savings Employer Matching Plans

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Other Benefits

• Other Benefits– Room & Board– Meals– Free Apartment

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You & Your MoneyClass 1, Part 2 – Your Taxes

International Centerat Catholic Charities Community Services

December 2013Instructor: Virginia Guilford

Your Taxes

• All US citizens and resident aliens need to pay taxes if they have over a certain amount of income.

• Types of Taxes (Federal, State, City, Social Security, and Medicare)

• Tax Periods• Tax Withholding • Estimated Tax Payments• Tax Refunds

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Types of Taxes

• Federal

• State

• City

• Social Security

• Medicare

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Federal Taxes

• Federal Taxes

• Collected by the US government through its tax collection agency, the Internal Revenue Service (the IRS)

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State Taxes

State Taxes

• State taxes are taxes that each state collects

– Some states have an income tax, some do not.

– Some states collect a ‘commuter’ tax – a tax on people who work in the state, but do not live there

– In addition to income taxes, some states and/or counties collect property taxes which are based on the value of any property that you own.

– Also, there may be a ‘sales tax’ – a small percentage of the price of your purchases. New York state has a sales tax of 4%.

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City Taxes• City Taxes

• A few large cities collect income taxes

– New York City collects an income tax for residents

– Yonkers also collects an income tax for residents

• Other city taxes

– Some cities also have a sales tax. NYC has a sales tax of 4.5% in addition to the state sales tax of 4%.

– There may be other special taxes as well, such as NYC’s Metropolitan Commuter Transportation District surcharge sales tax of 0.375%

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Social Security Taxes

• Social Security Taxes

• Social Security pays a small pension to older people and people who are disabled

• To fund Social Security, 12.40% of all wages up to a certain amount ($117,900 in 2014) must be paid to Social Security– Employers pay half this amount for their employees, and withhold the other

half from their employees’ pay– Self-employed people must pay the full amount themselves

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Medicare Taxes

Medicare Taxes

• Medicare is the health insurance system for people over 65

• To fund Medicare, 2.9% of all wages must be paid to Medicare– Employers pay half this amount for their employees, and withhold the other half

from their employees’ pay– Self-employed people must pay the full amount themselves– An additional 0.9% is due on income over $200,000 per year

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Tax Periods

• Annual Tax Period Jan 1 – Dec 31– Annual tax is based on the total amount of money

you earned in the previous year (from 1/1 to 12/31)

• Quarterly Tax Periods– First Quarter/Q1 Jan 1 – Mar 30– Second Quarter/Q2 Apr 1 – Jun 30– Third Quarter/Q3 Jul 1 – Sep 30– Fourth Quarter/Q4 Oct 1 – Dec 31

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Tax Withholding for Employees • Tax Withholding is a part of your salary that your

employer uses to pre-pay your taxes.– If you are an employee, your employer will withhold part of

your salary and send it to the Federal and State tax authorities.

– Your employer will ask you to fill out a W-4 form when you start work to help him estimate how much income tax you will owe at the end of the year.

– The employer then deducts a percentage of that total amount in each paycheck (tax withholding), and sends it to the Federal, State, and City governments.

– At the end of the year, your employer will send you a W-2 report showing the total you earned and how much was withheld & sent as a pre-payment of your taxes.

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Estimated Tax Payments for Freelancers

• If you are a freelance worker or a contractor, tax payments are not withheld from your pay.

• You are expected to estimate what you will owe, and make an estimated tax payment at the end of each quarter (Mar 30, Jun 30, Sep 30, and Dec 31).

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Tax Refunds

• If you had more tax withheld from your income than you owe, you will get a refund after you file your taxes.

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Where to Get Tax Help• If you want to know more about taxes in general, you can

visit the IRS Understanding Taxes website at www.irs.gov/app/understandingTaxes/index.jsp

• The IRS (Internal Revenue Service) has a website (www.irs.gov/ ) and offices in most cities where you can get answers to specific questions you have about your Federal income taxes.

• State tax departments also have websites and phone numbers for questions. (The New York State Department of Taxation & Finance website is www.tax.state.ny.us/ )

• Reputable tax preparers, such as tax accountants and companies like H&R Block can prepare your Federal, State, and City tax returns for a fee.

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You & Your Money Glossary

• Contains simple definitions of the most commonly used financial terms.

• Log on to www.virginiaguilford.com and download the Word document from the “Docs and Links” page. (The PowerPoint presentations used in this class are also available there)

• Or send your request tovg@virginiaguilford.com

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