Who Pays What in Payroll Taxes
Q. I am 28 years old and have been paying unemployment and disability insurance for 10 years. I just left a job voluntarily after four years and have been denied unemployment insurance. Is there any way I can collect on the money I have paid into the system for all these years? What about Social Security taxes? Is there a way I can elect not to pay for this program since the fund is expected to dry up before I retire anyway? -- S.G .
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A. This may come as a shock to you, but you have not been paying unemployment insurance for the last 10 years. Only employers support this state program, which is designed to provide workers a weekly income when they are out of work through no fault of their own.
Currently, employers are assessed a rate between 1.1% and 5.4% of the first $7,000 earned by each employee. Because California has what is called “experience rating,” the exact rate levied on each employer depends on the number of unemployment insurance claims filed by its former employees; the higher the number, the higher the tax rate.
Generally speaking, unemployment insurance is paid after an involuntary termination, including a discharge or layoff--but not a termination for intentional misconduct on the job. An employee who voluntarily quits without good cause is generally not eligible for benefits. Further, in order to receive benefits, a worker must be available and physically able to work and be actively seeking employment.
State disability insurance is usually paid for entirely by employees; this year they are required to contribute 1% of the first $31,767 of their annual pay. (Some employers do pick up the tab for this program as part of the benefits package offered their employees, but this is a rare exception.) Virtually all employees in the state are covered by this insurance; the only exceptions are some government, interstate railroad, nonprofit organization and domestic workers. However, a worker may file a claim with the state seeking exemption from program participation on religious grounds.
Social Security coverage is yet another matter. Federal law determines who is covered by the program, and workers have no individual choice, regardless of the system’s solvency 40 years hence.
About 95% of all workers in the United States are now enrolled in the retirement program, which also provides Medicare coverage. The notable exceptions are certain employees of school districts; fire and police departments, and state, county and other local governments. Employers and employees split the program’s payroll tax evenly.
Interest Will Still Accrue on Unpaid Loan
Q. I was recently awarded a judgment in Small Claims Court for non-payment of an interest-bearing loan. The decision made no mention of whether interest would continue to accrue on the note until it was paid or whether I am entitled to be repaid just the amount of the outstanding debt. Which is it? -- M.R.
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A. Interest continues to accrue on the loan at what is known as the “post-judgment rate,” which in California is set at 10% per year. The amount you are eventually repaid should be based on that assessment.
Benefit Ceilings for Retirees Who Work
Q. Is income earned by a Social Security recipient who is older than age 70 still subject to the self-employment tax of 15.3%? -- A.S.C .
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A. You are never too old to contribute to the Social Security system. If your job or employment situation is covered by Social Security, you are required to pay taxes regardless of your age.
Perhaps you are thinking about the age categories for the ceilings on the amount of money you can earn while still collecting Social Security. Under the 1995 earned-income limits, retirees under age 65 lose $1 of their Social Security benefits for every $2 of income earned over $8,160. Retirees between the ages of 65 and 70 lose $1 of their Social Security benefits for every $3 they earn over $11,280. Retirees age 70 and older are entitled to earn as much as they want without losing any of their Social Security benefits. These earned-income limits are adjusted upward each year according to a cost-of-living index.
How to Deduct Investment Expenses
Q. Please tell me how I can deduct expenses for stock trading activity on my income tax return. Where do I report my substantial expenses for magazine subscriptions and the portable receiver I use to monitor my stocks? Should they be included on Schedule B, where my investment interest is reported? -- R.D.A .
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A. Allowable investment expenses are deductible as miscellaneous items on Schedule A and are subject to the 2% adjusted gross income floor. This means that you may deduct only the amount of your investment expenses that exceed 2% of your adjusted gross income.
In addition, the 3% reduction for total itemized deductions applies if your adjusted gross income exceeds $111,800, or $55,900 if married and filing separately.
Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
