Category Archives: Articles

Nanny Tax: What You Need to Know When You Hire a Household Employee

A 60-second read by the Baron Team: 

  • Nanny taxes are taxes paid to the government from a person working in and/or around your home. These jobs can include nanny, housekeeper, gardener, chef, personal assistant or caregiver.
  • The worker is considered a household employee if the employer controls what work is done and how it is done and can be full time or part time work.
  • If you pay someone that works in your home $2,100 or more a year or $1,000 in a quarter they are considered a household employee.
  • The employer must obtain the employee’s name and social security number.
  • The employer must withhold a certain amount of compensation from a household employee for FICA and Medicare.
  • As well as withholding a certain amount of money from your household employee, you must also pay your share of FICA employer taxes and federal and state unemployment taxes.
  • The employee, as well as the employer, can benefit from filing these taxes. The employee can prove she/he was working for a set amount of time and qualify for certain government benefits, such as social security and unemployment.

  • Forms Required to file:
    1. Form SS-4 to obtain your federal Employer Identification Number, which is needed for the other forms.
    2. Form I-9 is needed to be filled out by your employee to verify she/he is eligible to work in the United States.
    3. W-4 Forms are used to determine what taxes are needed to be deducted from the household employee’s wages and sent to the IRS.
    4. Schedule H Form is part of your personal return with Form 1040 & an accountant can help determine the amount the employer is taxed for FICA and unemployment.

  • Insurance requirements:
    1. You must register for unemployment insurance in your residing state.
    2. You also need to have workers compensation insurance, which is very important.
      • If you reside in NY, you will also need to purchase a separate disability policy.

  • State taxes are generally paid quarterly while Federal taxes are paid annually.
  • If you refuse to file the proper tax documents you may be subjected to an audit from the IRS leading to tax evasion. Trying to classify your household employee as an “independent contractor” is a red flag to the IRS and should be avoided.

For more information on hiring household employees visit:  https://www.irs.gov/businesses/small-businesses-self-employed/hiring-household-employees

For more information on what forms are needed for hiring employees visit: https://www.irs.gov/businesses/small-businesses-self-employed/hiring-employees

If you have more specific questions on this matter, we recommend speaking with a tax professional.

If you have any other questions, please reach out to your Baron Financial Group team.

 

 

Things to Consider If You Have Over-Contributed to an IRA

A 60-second read by Victor Cannillo:

#1 – We highly recommend you hire a Certified Public Accountant to help you resolve the issue.

Here are some points to consider:

  • There are limitations on the total amount that may be contributed to an IRA. Currently, it’s the greater of either $5,500 ($6,500 if the person is 50 or older) or your taxable compensation for the year.

  • The IRS considers each individual person to have a single IRA.  The maximum contribution limits apply to all of your IRA accounts.  If you have more than one IRA account open, you can contribute to one account or all of your accounts as long as the total contributions meet the yearly limit.

  • If there are excess contributions to your IRAs, there is an annual additional 6% tax penalty (paid with the filing of Form 5329) on those excess contributions until you withdraw them from your account.

  • Normally, if the excess contribution for the tax year is withdrawn with any related earnings before the tax return deadline (including extensions), you are not subject to the 6% additional tax. Also the earnings on the excess IRA contributions as determined by the custodian will be subject to tax for the year the excess contribution was made. Those earnings are also subject to a 10% early withdrawal penalty if the person’s age is under 59 and a half for the year of the contribution.

  • You will need to consult a Certified Public Accountant to determine what tax returns need to be filed.

If you have more specific questions on this matter, we recommend speaking with a tax professional.

For any other questions, please reach out to your Baron Team.

Class of 2018: It Isn’t Too Early to Start Thinking about Your Retirement

A 60-second read by the Baron Team:  Congratulations 2018 College graduates! Throw that mortarboard as high in the air as you can and before it circles back down to earth, start thinking about saving for your retirement. You are most likely going to be responsible for setting yourself up for a successful retirement, so your best bet is to invest early and often.

Invest in yourself first. Most people think investing is the key to wealth, but while certainly important, you have to have some money first to invest. So as soon as you begin your first job out of school, start saving a minimum of 10% of your annual income for retirement. This will ensure that you invest in yourself first.  You should plan on saving this much or more for the rest of your working career.

Here is a behavior trick to help you accumulate savings: have money taken out of your paycheck automatically and deposited into a 401(k), 403(b), thrift savings plan, or other retirement account. Read our previous post on “What is the Best IRA for a Young Investor?”. Almost all employers offer retirement investment vehicles like these, where you can contribute a certain percentage of your salary for the future. What you put into the account will grow tax deferred and be earmarked specifically for retirement. Because your contributions are automatically saved, it forces you to invest, which you might not otherwise do, and the money will be spent. Consider the IRS’s system of collecting taxes throughout the year through tax withholding. They know that if it was up to us to save and pay them one big check at the end of the year, we would have already spent the money.  The same is true with investing. If a percent is taken out of every check directly, you won’t miss it. This is all part of behavioral finance, or the study of human behavior in financial decision-making. A fascinating field that we wealth advisors see play out on a daily basis.

Another behavioral finance mental trick is to keep three to six months of living expenses in a separate account from your checkbook, also known as an emergency fund. This will provide you with peace-of-mind to always know that no matter what bills come in or what happens in your career, you’ve got this safety-net of cash at your disposal that you can tap into. Keep the money liquid by putting it in a savings account or money market mutual fund. This will help protect you from those potential future financial downturns.

As always, if you have any further questions, don’t hesitate to contact the Baron Financial Group Team.

Why You Should Review Your “Digital Estate” Plan

A 30-second read by Nicholas Scheibner:  When a family member passes away, it is of course an emotional and stressful time.  For most, a significant portion of the stress can stem from the financial decisions the deceased made, or did not make, during their life, and what needs to be carried out by the loved ones left behind.  In many instances, a will is constructed to help direct some of the financial assets, per the request of the deceased.  However, financial accounts are not the only stress inducers.  Online and social media accounts are increasingly becoming more important to people. There are things you can do now to help your family put in order your “online life”, often referred to as a “Digital Estate”, when you are no longer around.

We suggest keeping a separate document with your will, containing any usernames and passwords to your online accounts.  The most important item will be your list of email accounts.  With access to your email accounts, a trusted family member can “reset/forgot password” most of your financial and social media accounts in order to close, or manage the accounts.  Also – this can sometimes be a quicker way to stop any recurring payments for online services, instead of calling the company and proving the person has passed away.

If you are uncomfortable writing out all of your usernames and passwords, you can begin to use a “password manager” that will store all of your information in a secure digital vault.  The only information your trustee will need is the username and password for the “password manager”.

Keep in mind, it is extremely important to watch over a deceased family member’s financial assets and credit, as a deceased person has a very high risk of becoming a victim of financial fraud and identity theft.

In order to prepare your family for what needs to be done towards end-of-life and once you have passed, we recommend reading some of our other estate planning posts.  And again, do remember to consider all of the online, financial, billing, and social media accounts that will continue if you were to pass on. 

Please reach out to your Baron Team with any estate planning questions.

College and Financial Aid When Parents are Divorced

Editor’s Note: This post was originally published December 1, 2016. The information is still current as of this date.

A 30-second read by the Baron Team: For students with divorced parents who live separately, the FAFSA (Free Application for Federal Student Aid) asks that you fill out financial information in regards to the custodial parent. For FAFSA, the custodial parent is the parent who the child has lived with the most over the last twelve months.

Provided that the ex-spouse is the non-custodial parent:

  • Many private colleges assume that the non-custodial parent could be a possible source of funding, and therefore require that they fill out a supplemental financial aid document.
  • In that case, any financial support the non-custodial parent may give would only affect financial aid provided by the school, not the student’s federal and/or state aid benefits.

For more information, you can go to FinAid.org and StudentAid.gov.

If you have any questions, don’t hesitate to contact the Baron Financial Group team.

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Baron Financial Group is an Independent Financial Planning and Investment Management firm with a fiduciary responsibility to put your best interests first.  As always, please feel free to reach out to us if you have any questions. To learn more about Baron Financial Group, view our 2-minute intro video.

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Nicholas Scheibner, CFP® is certified as a NAPFA-Registered Financial Advisor

Nicholas J. Scheibner, CFP®

Nick Scheibner, a Wealth Management Advisor and CERTIFIED FINANCIAL PLANNER™ Professional with Baron Financial Group, fortifies his commitment to the fiduciary standard by becoming a NAPFA-Registered Financial Advisor.  Nick joins Founder and Wealth Management Principal, Victor Cannillo at Baron Financial Group, as NAPFA-Registered Financial Advisors.  Victor has held this certification since 1998.

According to the National Association of Personal Financial Advisors (NAPFA):

NAPFA membership is granted only to advisors who pass an extensive screening process and those advisors must be paid directly by their clients, without receiving conflict-inducing commissions and rewards generated from the sale of financial products.

NAPFA members live by three important values:

  • To be the beacon for independent, objective financial advice for individuals and families.
  • To be the champion of financial services delivered in the public interest.
  • To be the standard bearer for the emerging profession of financial planning.

NAPFA’s continuing education (CE) policy is an important part of its commitment to the highest competency standards in the industry. NAPFA-Registered Financial Advisors complete 60 hours of CE spread across a broad range of subjects every two-year CE cycle.  NAPFA standards have continuously been the most rigorous in the industry for over 30 years.  All NAPFA-Registered Financial Advisors are required to always work in a Fee-Only capacity. The Fee-Only structure is the best way to align compensation with a client’s needs, forgoing any and all commissions and referral fees.

Click here to learn more about NAPFA-Registered Financial Advisors. To learn more about Baron Financial Group, contact us at 201-791-6408 or at info@baron-financial.com.

Responsible Guidance: What to Do If Your Email Has Been Hacked

A 30-second read by the Baron Team:

How do you know if your email has been hacked?

According to the Federal Trade Commission (FTC), your email may have been hacked if:

  • Your family and friends tell you that they received emails from you that you didn’t send
  • You are unable to login to your email
  • Your sent folder shows emails you never wrote or sent, or your sent folder is empty, etc.

What are the next steps if you have been hacked?

If you think that your email has been hacked, the FTC recommends these five steps:

  1. Make sure you have security software on your computer & remove any malware
  2. Change your passwords
  3. See what information is available from your email provider about how to restore your account
  4. Check account settings for anything unfamiliar
  5. Let friends and family know that you are having issues with your email so they know to ignore any messages with links, etc. that might come from your email.

To read more tips from the FTC on this topic, click here.

For more information on Cybersecurity, please view our
Personal Cybersecurity Webinar.

Please reach out to your Baron Team with any questions.

BFG at the ballpark: We say “Thank You” to Our Clients and Friends

A 30-second read by the Baron Team:  With spring right around the corner, Baron Financial Group hosted a client-appreciation event at the spring-training home of the Baltimore Orioles. The March 14th game versus the New York Yankees ended in a 7 to 4 win for the Orioles.  This is our third year hosting a client event at Ed Smith Stadium in Sarasota, Florida. An extra special treat for our guests, and advisors, was a visit from the Oriole Bird!

Victor Cannillo, Tony Benante and Nick Scheibner, of Baron Financial Group, with the Oriole mascot

It is our custom to make a donation to a local charity whenever we host a client-appreciation event.  Continuing with our tradition, a donation has been made in honor of our clients and friends to the “All Faiths Food Bank” in Sarasota.

Baron’s purpose is to help our clients reach their financial goals and to secure a better future for them and their families. In keeping with our goal to help others with their financial security, the firm is committed to helping those less fortunate.

Taking a Closer Look at ETFs – the Importance of Liquidity when Investing

A 30-second read by Nicholas Scheibner: You may have heard about low- or no-expense-ratio Exchange-Traded Funds (ETFs), but cost is not the most important factor when investing in an ETF – it’s liquidity. You want to make sure that the ETF you’re investing in has a high daily volume of trading. Everything can seem great with an ETF when markets are going up, but when things are going down, and you want to sell out of your fund, you may take a big loss.

To illustrate this, picture a room with 100 people, and a door that can only fit one person at a time.  Imagine everyone wanting to leave the room at the same time.  As you can imagine, there would be a rush to the door, and it would be difficult for everyone to get out – a similar theory applies to ETFs.  If there are very few people trading an ETF on a daily basis, it can be difficult to sell at the price you would like. You want to invest in an ETF that has a lot of activity, (a large door), so that when you want to exit, you can at a reasonable price. 

For more information on ETFs, you can read our “What are some differences between Exchange-Traded Funds and Index Mutual Funds? ” article.

For any other questions, please reach out to your Baron Team