Should I file married jointly or married seperately?
Hi Linda,
Thank you so much for your advice I've learned so much in such a little time just reading your forums:)
Here's my question, my husband and I married this year in May 08' we started a LLC last October 07' however, he is the sole proprietor and I am the only employee. We have a payroll service taking care of my payroll so that the taxes are being taking out(I had not informed them of the change in my marital status), but what is this I hear that spouses have different rules when it comes to businesses. I do know that I pay medicare,social security, unemployment and so does he since he has to match my taxes We want to benefit as much as possible because we aren't making much of anything right now as every new business does and we're stilling shopping around for a CPA. What advantages/disadvantages do we have so that we don't trigger a audit from the IRS in the future and how do we file this coming tax season? Also throw in any other considerations you may have...Thanks a million
Please Help,
Jos
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Spouse as Employee
Hi Jos,
Filing married joint or separate doesn't impact the situation. 99% of the time, fiing married-joint is the better option because some tax deductions/credits are not allowed if you're filing separate. However, since this is the first year you got married you should run the numbers both ways & see which is better.
You should definitely let the payroll service know you're the spouse-employee. While you are still subject to Medicare & Social Security, your wages are exempt from unemployment taxes. That will save you a couple hundred dollars a year.
As far as other tax savings, there is the Health Reimbursement Arrangement (HRA) for spousal employees. There are a lot of I's to dot & T's to cross, but you can get big tax savings if you can use this benefit. The LLC reimburses you for your health care premiums and out of pocket expenses. These are employee benefit expenses to the LLC which will reduce your husband's SE tax he pays on the net income of the business. The LLC can also setup a 401(k) plan. Contributions the LLC makes on your behalf also reduce income & SE tax on the LLC. Conversely, 401(k) contributions for your husband and the self-employed health care deduction do not reduce SE tax, only income tax.
As you're shopping around, consider enrolled agents. They can really help you with the tax side of things & are usually less expensive. Also let people know there is a spouse-employee relationship. That will have a big impact on their answers to your questions.
Hope this helps.
L:)