{"id":3073,"date":"2017-08-03T16:17:26","date_gmt":"2017-08-03T16:17:26","guid":{"rendered":"http:\/\/www.ua-cpas.com\/?p=3073"},"modified":"2019-01-10T04:43:45","modified_gmt":"2019-01-10T04:43:45","slug":"should-i-pay-my-spouse-a-salary-2","status":"publish","type":"post","link":"https:\/\/www.ua-cpas.com\/blog\/index.php\/2017\/08\/03\/should-i-pay-my-spouse-a-salary-2\/","title":{"rendered":"Should I Pay my Spouse a Salary?"},"content":{"rendered":"

\u00a0<\/strong><\/p>\n

\u00a0It\u2019s not worth the Taxes, Right?\u00a0<\/strong><\/span><\/span><\/p>\n

\"\"
Spouses Working Together<\/figcaption><\/figure>\n

It is not uncommon for one\u2019s spouse to work in the family business, whether as manager or in some other capacity. Assume that Nicole Neurologist owns a medical practice. Her husband, Josh, supervises billing and IT operations. Is it worthwhile for both spouses to receive a salary? It may seem pointless. After all, their money ends up in the same bank account anyway. If Nicole has reached the maximum Social Security and unemployment thresholds, why pay Josh a salary and incur additional steep payroll taxes? While that is true, there are several advantages to employing the spouse that are worth considering.<\/p>\n

Social Security Disability Benefits and Lost Wages<\/strong><\/span><\/p>\n

If Josh became permanently disabled, he would not receive Social Security benefits for his disability unless he satisfied two different earnings tests.\u00a0 He must meet a \u201crecent work\u201d test based on his age at disability. For example, at age 31 or more, an individual must work five out of the ten years prior to claiming disability. He must also satisfy a \u201cduration of work\u201d test based on his age at disability. At age 50, he needs to have worked seven years in total prior to his disability.\u00a0 If Josh was injured by an insured party, unless he has proof of a history of employment, he would not be able to recover any lost wages.<\/p>\n

Enjoy Self-Employment Tax Savings<\/strong><\/span><\/p>\n

If Nicole\u2019s business income is reported on Schedule C, she deducts the medical insurance expense for her and her family on page 1 of Form 1040. However, if Josh is an employee, then he can be the insured. She can deduct the medical insurance as a business expense on Schedule C.\u00a0 This would result in significant tax savings, as she now saves the 3.8% Medicare<\/span> portion of the self-employment tax; good deal for an expense she is incurring anyway.<\/p>\n

Good Credit is Essential<\/strong><\/span><\/p>\n

Even if Nicole is the breadwinner, there may come a time that Josh will need to rely on his own credit history. If he is paid a salary it will be easier to obtain the credit he will need.<\/p>\n

Boost his Social Security Benefits<\/strong><\/span><\/p>\n

The amount of Social Security benefits one receives is determined by the average of the 35 highest yearly salaries. Even if Josh\u2019s earning power appears meager, one never knows what the future holds. If he eventually gets a more lucrative job, the years he received a salary from Nicole\u2019s firm may ultimately boost his benefits significantly.<\/p>\n

Maximize Pension Contribution<\/strong><\/span><\/p>\n

As an employee, Josh can be enrolled in the company pension. This allows the company to make contributions on his behalf.<\/strong> By adding Josh\u2019s pension contribution to Nicole\u2019s, the couple will enjoy increased tax free growth on their retirement funds, while the couple saves on both US and NJ income taxes.<\/strong><\/p>\n

Get a Dependent Care Credit<\/strong><\/span><\/p>\n

Unless both spouses have earned income they are not entitled to the dependent care credit, which is currently up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children.<\/p>\n

Additional Benefits<\/span><\/strong><\/span><\/p>\n

There are additional benefits to paying your spouse a salary. Call for a consultation.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Paying a Spouse a Salary has many financial benefits. Most businesses in which a spouse works, want to save on Social Security taxes and don’t pay the non-owner spouse a salary. There are significant tax and non-tax benefits to paying a spouse a salary.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,10,14,23,24],"tags":[110,134,195],"class_list":{"0":"post-3073","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-small-business-forum","7":"category-hot-topics","8":"category-medical-practices","9":"category-taxes","10":"category-taxes-medical-practices","11":"tag-income-tax-planning","12":"tag-medical-practices-2","13":"tag-tax-tips","14":"entry"},"_links":{"self":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/3073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=3073"}],"version-history":[{"count":2,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/3073\/revisions"}],"predecessor-version":[{"id":3430,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/3073\/revisions\/3430"}],"wp:attachment":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=3073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=3073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=3073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}