Categories: News Articles

Hire Your Spouse As An Employee

Wedding rings and moneyIf you’re like many small business owners, your spouse helps out at the office. So why not make your spouse an official employee of the company?

RETIREMENT PLANS –  Your spouse will be entitled to retirement benefits from any qualified plan that your company provides regular employees. If you have a 401(k) plan, the company can match the contributions in whole or in part.

Let’s say your wife is put on the payroll and paid a salary of $20,000. She contributes $5,000 to the company 401 (k) plan. Since your company matches 50 cents on the dollar, she sets aside $7,500 a year in her account. Assuming an 8% interest rate, your wife will accumulate $117,341 after 10 years.

FRINGE BENEFITS –  As a formal employee of your C corporation, your spouse is eligible for certain tax-free fringe benefits. For example, the corporation can protect your spouse with $50,000 of group term life insurance. Other options: educational assistance programs, company cars, the use of athletic facilities and health insurance. S Corporations can’t deduct fringe benefits provided to employees who own more than a 2% interest in the corporation. If you operate an S corporation, the IRS will treat you and your spouse as one person for this purpose.

TRAVEL EXPENSES –  Prior to 1994, you could deduct the travel expenses of a spouse who accompanied you on a business trip as long as there was a business purpose for her presence. But now you can only deduct your spouse’s travel expenses if she is also a forma employee of the business. By hiring your spouse, who may accompany you on business trips anyway, you can restore travel deductions that were previously lost.

TAXES –  Remember that spouses are subject to FICA and Medicare withholding which must be matched by the employer. But S corporation owners and sole proprietors don’t have to worry about corporate income tax. The income from those businesses is reported on the personal 1040 tax return. Therefore, the smaller the salary paid to your spouse, the higher the net income and less amount of payroll taxes.

If you have any questions or require further info please call 718-531-1105 or send an email.

This web site and these articles are not tax or legal advice and are not intended as tax or legal advice.  They are intended to provide only general, non-specific legal information and are not intended to cover all the issues related to the topic discussed.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This web site and these articles are based on United States law.  You should consult with an accountant or lawyer familiar with the issues. This web site and the articles contained on this web site are not solicitations.

Contact Info:

Ronald Semaria
Semaria Consulting
1408 East 66th St
Brooklyn, NY 11234

Phone Numbers:

Phone: 718-531-1105
Toll-Free: 866-531-1105
Toll-Free: 888-IRSAUDIT
Toll-Free: 888-RONTAXES
Fax: 718-444-7152