Author Topic: Proper way to split income in a Sole proprietorship income Husband/wife  (Read 314 times)

BTDretire

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Here how my accountant set it up 15 years ago.
 In my name is a Sched C, all income and expenses are recorded there, included
is a deduction for contract labor. The contract labor amount is then put on a second
Sched C under her name. Business income is split 50/50. This is all wrapped up and we file MFJ.
 I've been told other tax preparers would do it different.

 I thought I retired, but it turns out over the complete year I'll average
about 20 hours a week. Wife needs help to run business especially in summer.

Now that I'm working less, are we required to split income differently?
Hours are split 70+hrs and 20hrs.

Second question, is there an easy way to hire a single employee re: all the technical details?
Workman's comp, tax witholding, posters that must be put on walls, etc.
 I have tried companies that hire employees and then lease the worker to you,
you pay the company, and the company pays their employee.
 They push me out when they find I only want one employee.
« Last Edit: June 29, 2018, 05:34:12 PM by BTDretire »

BTDretire

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I'm a little surprised at no response.
Is my income split what tax accounts normally do with husband and wife sole proprietorships?

terran

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I think you could split the income and file 2 schedule C's without the step of you "paying" your wife and expensing that payment on your schedule C. See https://www.thebalancesmb.com/the-qualified-joint-venture-frequently-asked-questions-397798

Catbert

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No real answer, but a couple of thoughts:

Can you split income to maximize overall social security?  That could be loading as much income as possible on one person so that as much income as possible is over the SS payment threshold.  Or paying as much as possible in SS taxes to maximize payments you'll receive in retirement.  Or shoring up the SS history of the lower earner.

Would there be any benefit to somehow qualifying as a "women owned business".  A husband and wife friend with a small business did this (not exactly sure how) and were able to better compete for local government contracts.

BTDretire

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No real answer, but a couple of thoughts:

Can you split income to maximize overall social security?  That could be loading as much income as possible on one person so that as much income as possible is over the SS payment threshold.  Or paying as much as possible in SS taxes to maximize payments you'll receive in retirement.  Or shoring up the SS history of the lower earner.

  With me cutting back on hours, we could shift more income to her to bump her SS, because hers is lower than mine.
We won't reach the threshold, income not that high.

Quote
Would there be any benefit to somehow qualifying as a "women owned business".  A husband and wife friend with a small business did this (not exactly sure how) and were able to better compete for local government contracts.

 Good thought, but not applicable to our business.