Editor’s Note: This post was originally published March 29, 2016. The information is still current as of this date.
A 60-second read by the Baron Team: You probably have homeowner’s insurance for your home and car insurance for your vehicle, but do you have umbrella insurance? In a society where many of us are concerned about personal liability and the possibility of being sued rightly or wrongly, the more assets you accumulate the more important personal liability protection becomes. Umbrella insurance will help to cover your legal expenses if someone is injured by your car or in your home. For example, imagine that you are driving to the grocery store on a Saturday afternoon. You brake for a running deer and the person behind you rear-ends your car and is injured. Now, the other driver wants to sue you for more than your auto policy will cover. This is where umbrella insurance would come into play. Umbrella insurance will help you pay for the difference instead of having to take that money out of your own personal savings.
When looking to get Umbrella insurance, there are a few things you may want to know:
You must ask for umbrella liability insurance. Since the commissions are so small, your insurance agent may neglect to mention it.
Insurance companies may require you to carry a required amount of liability insurance on your homeowners and automobile policies and to place both your auto and homeowners policy with the same company. Perhaps do some research, or talk to your insurance agent about this.
Depending on your situation, you may want to look to either have enough protection to exceed your assets, or carry a minimum of $2 million of personal liability with an inexpensive umbrella liability policy.
This year we are pleased to award a scholarship to two deserving graduates from the Fair Lawn High School Class of 2018 – Romi Joseph and Jared Weber. Romi will study Economics at Rutgers University in New Brunswick, New Jersey and hopes to pursue a career in business.
Jared will attend Clemson University in South Carolina and will major in Finance, with a minor in Accounting. Jared tells us, “In the future, I hope to become a financial adviser in order to help people learn how to manage their money.” We know how you feel, Jared!
Continuing in our commitment to education, Baron Financial Group is proud to help these deserving students further their education.
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:
Form SS-4 to obtain your federal Employer Identification Number, which is needed for the other forms.
Form I-9 is needed to be filled out by your employee to verify she/he is eligible to work in the United States.
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.
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.
You must register for unemployment insurance in your residing state.
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.
#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.
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.
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.
Baron hosted their fourth annual Casino Night event on May 3, 2018, at the newly-renovated Macaluso’s in Hawthorne, New Jersey. Attendees were given “play” money to participate in the casino games, ensuring no one could lose real money. Chips were cashed in for raffle tickets for the chance to win some great prizes, including gift baskets, and gift cards to various local businesses. The ultimate and most coveted prize of the evening was two tickets to see Beautiful: The Carole King Musical on Broadway.
Although guests had an opportunity to win raffled prizes, the big winner was the “Fair Lawn Food Pantry”, who received a monetary donation from Baron to honor our clients and friends.
Baron Financial Group recognizes that there are members of the community who are not as fortunate as others, who need help to meet the most basic of needs. Baron’s purpose is to help our clients reach their financial goals and to secure a better future for them and their families. With that purpose in mind, we are also committed to making the community a better place. It is our hope that together, we can look forward to a future of promise for all.
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.
Baron Financial Group sponsored HONOR’S annual “Concert to End Homelessness.” The event was held Saturday, April 28, 2018 in Greenwood Lake, NY, with close to 500 people in attendance. Rob Cannillo, the brother of Baron Principal/Partner Victor Cannillo, helped coordinate the fundraiser and helps to raise awareness for HONOR.
HONOR has been helping Orange County, New York residents in need since 1974. On their website, it states: Since 1974 HONOR has provided all Orange County residents in need a safe environment that is committed to rebuilding the self-esteem and dignity of all those we are blessed to serve. With the goal of self-sufficiency in mind HONOR provides:
Residential stabilization & rehabilitation
HONOR’s vision is to “assist all clients to receive help appropriate to their needs so they may enjoy the growth and development which is their right as human beings.”