Ask Mia: Vol. 2
Updated: Oct 24, 2022
This article appeared in the Summer 2021 edition of Petit Mort Magazine.
Mia is an International Companion based in NYC and SF. She’s also a CPA who previously worked in finance for over a decade. She’s always been passionate about promoting financial literacy, especially among women, LGBTQIA+ folks and marginalized communities.
PHOTO BY LAURA CORINN
QUESTION
I’m undocumented and use an invalid SSN for my Only Fans and civilian job. What should I use to file my taxes in the US?
ANSWER
Per IRS official guidance, you should be filing with your Individual Tax Identification Number (ITIN). ITINs are a tax processing number issued by the IRS specifically for certain individuals including unauthorized immigrants. You can obtain an ITIN by submitting IRS form W-7 IRS Application for Individual Taxpayer Identification Number.
Q
I’ve officially decided to take the plunge and start investing my money! I’m totally new at this and am looking for long term gains and steady growth.
A
I’d recommend Vanguard index funds. They’re low cost (practically free) and you can set it and forget it.
Q
How would you recommend someone begin getting into or starting with Vanguard funds/other mutual funds? What advice do you have for investors just starting out, and are there paths you recommend for people along the spectrum of risk tolerance?
A
This answer is going to vary tremendously depending on how much you have to invest, as you mentioned your risk tolerance, and your expected time to retirement. My first rule is to NEVER invest money you can’t afford to lose. Risk and returns are directly correlated, meaning riskier investments typically yield higher returns. But the flip side is that riskier investments also run greater risks of incurring losses and experience more volatility. If you have some money to invest, but can’t risk losses, I’d recommend treasury bonds, certificates of deposit (CDs) or interest bearing savings accounts. You won’t make much, maybe even less than inflation. But your money is secure and in the case of deposits, insured by the Federal Reserve (FDIC insured). Treasury bonds are used by financial institutions as the benchmark for the risk free rate of return, so while there’s no clairvoyant guarantee the US government won’t default on its debt, it’s pretty unlikely.
My second rule of investing is to NEVER invest in anything you don’t understand. If you understand cryptos and feel comfortable trading Dogecoin, AND you have money you can afford to lose/gamble with, go for it! But don’t get glossy eyed looking at all the money other people are bragging about making on Gamestop stock on Reddit and assume you’ll necessarily make lots of money too. What goes up can also come crashing down. I personally don’t trade crypto because I don’t understand the asset sufficiently. I do swing and day trade stocks and some over the counter securities, as well as options. It took me 10 years in finance working for some of the top institutions to gain a level of knowledge to the point where I’m comfortable betting on leveraged Exchange Traded Funds (ETFs), individual securities, and derivatives. This is not to say you can’t learn this information on your own, but even if you’re a genius with a photographic memory, you won’t be able to do this in one day reading Reddit’s r/wallstreetbets.
Finally, brokers such as Vanguard and Fidelity have risk indicators past returns reported for each of their index and mutual funds. They also report the expenses incurred by each fund. I’d consider both the riskiness of each fund and their expense ratios when deciding what to invest in. Index funds will always have a lower expense ratio than mutual funds, since they are passively indexed to exchanges or baskets of securities, and not actively traded by investment managers.
Q
How should we save for retirement, given that our earnings over the years graph is different from most professionals?
A
Our earnings over the years graph is different from many salaried professionals, but surprisingly not very different from other gig economy workers, entrepreneurs and small business owners. I’d recommend contributing the maximum allowable amount to a simple Individual Retirement Account (IRA) or a Roth IRA. The max allowable contribution for 2021 is $6,000 for either a simple or Roth IRA. If you choose a simple IRA, you’ll receive a tax deduction for your contribution in the current year. If you choose a Roth IRA, you won’t receive a tax deduction in the current year, but your earnings within the Roth IRA account will grow tax free for as long as you leave the money in. Equity markets have historically returned roughly 7% per year over a 40 year period. This means if you invest $6,000 each year for 30 years and leave it in your Roth IRA, you could earn over $425,000 by the time you pull the money out for retirement. And you wouldn’t owe a penny of taxes on any of it. Roth IRAs are a great deal, but you can only contribute to them if you earn under $140,000 as a single taxpayer or $208,000 as married taxpayers. Another reason I love Roth IRAs is that they can serve as your rainy day fund. Unlike a simple IRA, where you’d owe a 10% to 25% tax penalty for withdrawing the money before you’re 59 ½ years old, you can withdraw the money you’ve invested into your Roth IRA anytime without penalty.
Q
How would you best document travel write-offs with an eye to getting audited? I know audits don’t happen that often but I am a planner and a risk minimizer. Currently I keep a datebook with cryptic notes but I don’t know if that will actually fly if I need to present it to the IRS.
A
In the unlikely event you get audited, you’ll have to dig up proof of those actual expenditures and show proof that they’re business-related. So hotel charges coinciding with bookings and flights with tours are good. You don’t necessarily need receipts if you have credit card charges. Any deductions the IRS deems not allowable will incur back taxes. But given the low risk here, I would strongly recommend you still claim all your business expenses, as they are deductible. Start building credit.
Q
I’ve never had a credit card and don’t know where/how to start building credit.
A
I’d recommend making a free account on CreditKarma.com. It will show you your credit score across from Transunion and Experian, two of the 3 credit reporting agencies. Credit Karma will also send you alerts and changes in your credit score. You can also see what your approval odds for different credit cards are. Another quick way to build credit is by opening a secured credit card. Most major banks will allow you to put an amount of cash down for a secured credit card. Pay off your balance in full each month (you should be doing this anyway, if you can) and you’ll soon see your score increase.
Finally, if you have credit card debt, prioritize paying off the highest interest rate one first. Your credit score is affected by your credit utilization, meaning how much of your available credit you are using. Anything over 30% will negatively impact your credit score. For example, if you expect to charge $1,000 each month on your credit card, you should have at least a $3,000 limit across all of your accounts. Then pay off the full balance each month to avoid interest and late fees.
Q
How do you cover your ass if you’re getting gift letters from clients, but don’t think they’re filling out their form 709?
A
The gift letter is your cover. Your client’s documentation deficiency is not your problem.
Q & A BY MIA LEE
PHOTO BY LAURA CORINN