La la la la la

I was on the phone with my sister Rose for over 2 hours tonight.  She prevented me from eating dinner.  Just kidding.

We talked about a variety of topics, including what the definition of a bonus is versus the definition of commission.  These can be used interchangeably, but the definitions are different.  As a human resources and payroll expert, I can explain the differences easily.  I can probably also debunk some myths along the way.

One highly held myth is how these different types of income are taxed.  I've been told a couple of times just within the past six months that the tax rate for bonuses is higher than the tax rate for commissions.  This is simply not true.  Income is income, and at the end of the day (or year when you file your taxes), you are taxed at the rate that the IRS says you are to be taxed at.

I'm sure the confusion is in the difference between "tax rate" and "withholding rate."  Employers are required to withhold your income tax.  When you receive additional income such as a bonus or commission, the withholding rate is higher.  So when you see your $10,000 bonus net out to $6,000, your employer was required to withhold at a 40% "withholding rate."  You just paid the IRS $4,000.  But when you file your taxes and you are in the 30% "tax rate" bracket, you were supposed to pay only $3,000.  You will receive a refund of $1,000.

Are you able to absorb this information?  I think some people naturally repel it just by virtue of the subject.  My sister and I spoke about that too.  We won't name any names, but some children in our family can easily absorb information and others are what we call our "La la la la la" children.   We hold on to hope though because some "La la la la la" children grow up to be successful adults.

To help them along the way, we (parents and teachers) need to recognize that children learn differently.  Some do well on tests, and some don't.  Some are more artistic, and some are more academic.  Some are leaders, and some are followers.  Some care about details, and some don't.  How do we make the learning environment more accommodating or more conducive to the different learning styles?  I honestly don't know but have some ideas.  However, that's for another day and another blog post.

I was not a "La la la la la" child, but my sister Rose was.  It's true.  She was not interested in math and hated it.  This translated into not doing well in the subject but certainly did not mean she wasn't intelligent.  I loved math and always did well.  I can probably talk your ear off about how algebraic formulae can help solve everyday problems or what's exciting about derivatives.

Are we successful adults today?  I think so.  Rose is a certified personal trainer, which means she is an expert in physical fitness and nutrition.  I am a startup junkie, which means I am an expert in building startup companies.  I "La la la la la" her expertise and she "La la la la las"mine.

And I'm sure most people will "La la la la la" the IRS.

Thanks for reading, and I hope you learned something from my post today.