8 min
Employing your spouse WILL save you MONEY! Vast Voice: Telling Business Secrets to Entrepreneurs!
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- Entrepreneurship
Hiring your spouse to work as an employee in your business can save you big on taxes. The savings can be particularly great if you are a sole proprietor or have a single-member LLC taxed as a sole proprietorship or as a partnership (as long as your spouse is not a partner).
But this arrangement can backfire if you don’t do it the right way. Here are five key things to know about employing your spouse.
1. Pay Your Spouse Tax-Free Employee Benefits, Not Taxable Wages
2. Establish a Medical Reimbursement Arrangement
3. Take Advantage of Certain Other Fringe Benefits
4. Beware of Certain Tax-Free Benefits
5. Make Sure Your Spouse Is Your Bona Fide Employee
Takeaways
Hiring your spouse can result in substantial tax savings, but only if you pay your spouse solely, or mainly, with tax-free employee fringe benefits instead of taxable wages. The IRS doesn’t require you to pay your spouse any W-2 wages.
The most valuable fringe benefit you can provide your spouse-employee is reimbursement for health insurance and uninsured medical expenses. You can accomplish this through a 105-HRA plan if your spouse is your sole employee, or through an ICHRA if you have multiple employees.
Tax-free employee fringe benefits are not limited to health benefits — for example, you can provide certain education, life insurance, and working condition fringe benefits.
For your spouse-employee deductions to withstand attack by the IRS, you must be able to show that your spouse is a bona fide employee. To do so, your spouse should
use a time sheet to keep track of the work performed and submit that time sheet to you on a regular basis;
be regularly paid a reasonable amount;
work under your direction and control; and
not be a co-owner of your business.
Few people realize that employing a spouse can save a ton of tax dough — but it can. Doing so is complicated, as you can see, but in most instances it can be quite beneficial to an entrepreneur. A few resources can be found at VastSolutionsGroup.com or at the IRS website. Either way, good luck and have fun saving some money as a result of this article.
Hiring your spouse to work as an employee in your business can save you big on taxes. The savings can be particularly great if you are a sole proprietor or have a single-member LLC taxed as a sole proprietorship or as a partnership (as long as your spouse is not a partner).
But this arrangement can backfire if you don’t do it the right way. Here are five key things to know about employing your spouse.
1. Pay Your Spouse Tax-Free Employee Benefits, Not Taxable Wages
2. Establish a Medical Reimbursement Arrangement
3. Take Advantage of Certain Other Fringe Benefits
4. Beware of Certain Tax-Free Benefits
5. Make Sure Your Spouse Is Your Bona Fide Employee
Takeaways
Hiring your spouse can result in substantial tax savings, but only if you pay your spouse solely, or mainly, with tax-free employee fringe benefits instead of taxable wages. The IRS doesn’t require you to pay your spouse any W-2 wages.
The most valuable fringe benefit you can provide your spouse-employee is reimbursement for health insurance and uninsured medical expenses. You can accomplish this through a 105-HRA plan if your spouse is your sole employee, or through an ICHRA if you have multiple employees.
Tax-free employee fringe benefits are not limited to health benefits — for example, you can provide certain education, life insurance, and working condition fringe benefits.
For your spouse-employee deductions to withstand attack by the IRS, you must be able to show that your spouse is a bona fide employee. To do so, your spouse should
use a time sheet to keep track of the work performed and submit that time sheet to you on a regular basis;
be regularly paid a reasonable amount;
work under your direction and control; and
not be a co-owner of your business.
Few people realize that employing a spouse can save a ton of tax dough — but it can. Doing so is complicated, as you can see, but in most instances it can be quite beneficial to an entrepreneur. A few resources can be found at VastSolutionsGroup.com or at the IRS website. Either way, good luck and have fun saving some money as a result of this article.
8 min