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Old 12-12-2018, 10:13 AM
 
Location: MD's Eastern Shore
2,281 posts, read 2,782,908 times
Reputation: 4007

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Here is something I am having a hard time finding an answer to.

I have a boat detailing business in which it has grown enough that I have my wife help out on every boat and I pay her for her work.

We file taxes jointly.

In the past she has only done a small amount of work so I didn't bother separating anything and just put everything under my name as the checks are made out to me or my company anyway.

Now she is working enough that I would like her to get credit for her earnings for SS and getting a car loan in her name, etc...

How do I do that?

I understand that as a "contractor" she would need to pay self employment taxes but they would get payed anyway if it was all under my name, but under my name, she would not get any credit.

Would I need to make out a 1099 for her even though our taxes are joint?

???????
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Old 12-12-2018, 12:08 PM
 
Location: 5,400 feet
2,286 posts, read 2,335,436 times
Reputation: 2982
You need to review the IRS rules for employee vs. contractor.
https://www.irs.gov/businesses/small...ed-or-employee
https://www.ssa.gov/pubs/EN-05-10022.pdf
https://www.irs.gov/businesses/small...ployment-taxes

You also need to run the numbers on which would be better, having her as an employee and having your company pay her S/S and Medicare (with the company paying the employer half and taking the tax deduction and issuing a W2), or treating her as contractor and having her pay 'ee and 'er parts (her own tax schedule, deduct 'er part of S/S and Medicare, she may other deductions, via a 1099 from your company). There may well be tax benefits to one over the other.

If one of the objectives is to provide her with an earnings history for credit and S/S earnings history, she needs to receive a W2 or 1099. Social Security requires 40 quarters in the system to receive benefits based on one's own earnings. Otherwise, she will be relegated to half of yours. Note that the IRS requires employers and independent contractors to make timely payments of taxes withheld (FIT and S/S). For small employers and individuals that used to be quarterly, but I don't know if that's the schedule.

You have all the info needed to determine which works best for both of you based on your own data.
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Old 12-12-2018, 12:12 PM
 
5,763 posts, read 3,605,705 times
Reputation: 21631
^Good info. A CPA could do this for you if you're swamped.

Congratulations on having a growing business! Exciting times.
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Old 12-12-2018, 08:30 PM
 
2,264 posts, read 1,221,725 times
Reputation: 4639
Keep in mind, a spouse can claim half your benefit and there is a personal max as well as a family maximum which can be collected. Chart your benefits out on the social security website and see where you fall plus her half vs the maximum.

In addition, payroll taxes stop at 128,700. If your earnings are over that there is no reason to pay her and start over.

FICA taxes are deductible. No reason to not run it through the company if you elect to pay her
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Old 12-12-2018, 09:13 PM
Status: "43 restaurants within 6 blocks of my house" (set 19 hours ago)
 
Location: The Berk in Denver, CO USA
13,361 posts, read 19,063,384 times
Reputation: 20934
You need a tax expert.
Now.
In 2018.
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Old 12-15-2018, 11:15 PM
 
5,316 posts, read 2,461,028 times
Reputation: 5175
Quote:
Originally Posted by jiminnm View Post
You need to review the IRS rules for employee vs. contractor.
https://www.irs.gov/businesses/small...ed-or-employee
https://www.ssa.gov/pubs/EN-05-10022.pdf
https://www.irs.gov/businesses/small...ployment-taxes

You also need to run the numbers on which would be better, having her as an employee and having your company pay her S/S and Medicare (with the company paying the employer half and taking the tax deduction and issuing a W2), or treating her as contractor and having her pay 'ee and 'er parts (her own tax schedule, deduct 'er part of S/S and Medicare, she may other deductions, via a 1099 from your company). There may well be tax benefits to one over the other.

If one of the objectives is to provide her with an earnings history for credit and S/S earnings history, she needs to receive a W2 or 1099. Social Security requires 40 quarters in the system to receive benefits based on one's own earnings. Otherwise, she will be relegated to half of yours. Note that the IRS requires employers and independent contractors to make timely payments of taxes withheld (FIT and S/S). For small employers and individuals that used to be quarterly, but I don't know if that's the schedule.

You have all the info needed to determine which works best for both of you based on your own data.
You canít simply choose which one you want. Someone who is in fact a employee, canít simply be classified as an IC because it would be better.
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Old Yesterday, 02:24 PM
 
Location: MD's Eastern Shore
2,281 posts, read 2,782,908 times
Reputation: 4007
Hopefully I didn't screw up too bad. This was for 2017 which I filed late but in a few month's, when I do 2018 taxes she'll have more income to report.

On the tax software there was a place to put spouses income so I wrote it in there as self employment funds. I put the schedule C and deductions all under my part since it s technically my company. Tax wise, it worked out exactly the same as if I reported all income for me only.

This coming tax time I'm going to get all my stuff together and give it to a pro to do as I started a charter business as well, bought a truck for work and turned my skiff into a charter boat. In over my head now for doing them myself.

Thanks for the reply's.
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Old Today, 09:48 AM
 
3,412 posts, read 2,427,028 times
Reputation: 5932
My husband and I also work together and we report everything under my name. He works for free. Because we file jointly, it doesn't matter, we've been through the full IRS audit. I'm the one who needs the higher credits for SS, he's good.
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