Discussion:1099 vs. W2 employee for the Spouse
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Discussion Forum Index --> Consumer Questions --> 1099 vs. W2 employee for the Spouse
| 2 July 2009 | |
| Husband has a S-Corp and wife does some office work for the S-Corp. Wife has another W2 job and will reach the social secruity tax maximum for the year.
Should husband’s S-Corp issue 1099 to the wife or should the wife be a W2 employee of the S-Corp? Husband and wife filed married filing jointly, and since S-Corp's net profit flows through the return and wife meets FICA maximum already, the only thing I can think of may be difference in medicare 1.45%. Is it better for wife to be W2 or 1099? | |
| 2 July 2009 | |
| it's better for her to work for him for free
and increase his salary
(I don't see how you can ethically even suggest a 1099 for an office employee) | |
| 3 July 2009 | |
| What's the ethics with that and the legality? I've been pondering that in some situations. Guy has his own business, live in girlfriend/wife works for him. GF/wife used to work but due to economy was laid off and is now collecting unemployment. While searching for another job, she works for him and he just adds additional salary to his paycheck. She is actually working, yet still collecting unemployment.
Or let's say she is divorced and her salary, if she was earning it would be calculated in child support. medical copays and daycare percentages between the parents. Just wondering the thoughts on Kevin's suggestion because I have seen these things actually occur. | |
| 3 July 2009 | |
| I believe it is unethical because any tax professional should know the difference between a common law employee and an independent contractor. Any tax pro that recommends the taxpayer not follow the law is unethical. | |
| 3 July 2009 | |
| I'm not talking about the 1099 vs W-2. I'm talking about your suggestion of working for free and upping the boyfriend/husband W-2 when taken in context to what I described above. | |
| 3 July 2009 | |
| wives should always work for free for their husbands
it's in the Bible somewhere (hey, you folks can't see my tounge in my cheek from where you are sitting, can you?) Colossians 3:18 Ephesians 5:22 | |
| 3 July 2009 | |
| In reality, if the taxpayer didn't want to waste the money on his wife's matching FICA (her half would be a refundable credit on their 1040 and thus wouldn't be wasted), then he should just not pay her and instead maximize his salary for SS purposes.
so now I'm open to chastisement on the idea of him receiving higher pay when in reality he didn't do the additional work | |
| 3 July 2009 | |
| Anyone who has read TaxAlmanac for a while knows that Kevin speaks in tongues.
But those cheeky words are good advice. When one spouse has had significantly lower earnings than the other spouse, the Social Security benefit the lower-earning spouse will receive is 50% of the the higher-earning spouse's benefit once the higher-earning spouse has reached full-retirement age. In such cases it will have been a waste of money to have paid Social Security tax for the lower-earning spouse. -- Larry Hess, CPA | Albuquerque, NM | |
| 6 July 2009 | |
| Kevin, not trying to put you on the spot, but why would this situation any different from the EIC situations where a client might be manipulating their pay to maximize the credit, or not including their mileage deduction in their Sch C to get said credit.
In my opinion, it's more of an unethical situation above than the EIC deals. Which has been kind of my rant about that in those posts. As long as you have money, it's ok to screw with the code. If you don't then the heck with ya. | |
| 7 July 2009 | |
| Well, for what it's worth, I'd say "no way" to unemployment/welfare fraud or child support malfeasance, the two things that Fsteincpa seemingly described above, and also to using this trick for EIC fraud, regardless of how much money they've got. But I can see that there's a gray area where this could be beneficial to a married couple. To me, it would depend greatly on what the tasks were - think how many spouses have helped each other out at home over the years, writing or editing reports, filling out expense reports, etc. If it's something like that, then I could see it being fine. (But for devil's advocate sake - sometimes the spouse ought to be filling up their own account, rather than maximizing the shared account. Stuff happens, and the shared account may no longer be shared when the time comes to draw down from it.) | |
Death&Taxes (talk|edits) said: | 7 July 2009 |
| Putting the girlfriend's wages on his W-2 so that she can continue collecting UC is a workplace accident waiting to happen, like having a hand caught in the copier or the like. Wait until she finds out she hasn't a leg to have workmen's comp pay her medical bills, and if disabled, to collect disability. | |
| 7 July 2009 | |
| Exactly DT - Something I tell every client who might possibly want to pay employees under the table. I tell them they need to put these people on payroll at least a little bit. Yes, should be always and doesn't really make sense not to, but some still ive by the old ways. | |
