You & Your Money Class 1, Part 1 – Your Income International Center at Catholic Charities Community Services December 2013 Instructor: 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 2

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. 3

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? 4

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 5

Kinds of Workers Freelance / Contractor Working as a free-lancer or independent contractor is like having your own business. 6

Kinds of Workers Working 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, to report your employer. 7

Working Hours and Paid Time Off Working Hours Holidays Sick Days Vacation 8

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. 9

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 4 th 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 (3 rd Monday in January) – Presidents’ Day (3 rd Monday in February) – Good Friday (Friday before Easter Sunday) – Columbus Day (a holiday in New York State, 2 nd Monday in October) – Veterans’ Day (November 11) 10

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. 11

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. 12

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. 13

Getting Paid Minimum Wage Gross Pay and Net Pay Payment Method Pay Periods 14

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 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 16

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. 17

Pay Periods Weekly Every 2 Weeks Twice a Month Monthly Daily/End of Project 18

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 19

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 20

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 21

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. 22

Workers Compensation Workers Compensation. – A kind of insurance that covers you if you cannot work because of an injury that happened at work. 23

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 24

Other Benefits – Room & Board – Meals – Free Apartment 25

You & Your Money Class 1, Part 2 – Your Taxes International Center at Catholic Charities Community Services December 2013 Instructor: 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 27

Types of Taxes Federal State City Social Security Medicare 28

Federal Taxes Collected by the US government through its tax collection agency, the Internal Revenue Service (the IRS) 29

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%. 30

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% 31

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 32

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 33

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 34

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. 35

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). 36

Tax Refunds If you had more tax withheld from your income than you owe, you will get a refund after you file your taxes. 37

Where to Get Tax Help If you want to know more about taxes in general, you can visit the IRS Understanding Taxes website at The IRS (Internal Revenue Service) has a website ( ) 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 ) 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. 38

You & Your Money Glossary Contains simple definitions of the most commonly used financial terms. Log on to 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 to 39