Hiring spouse / giving half business away

[bonebrokemefix]

I'm a w2 employee, but also have 1099 income for 2017. By the end of the year I hope to have a solo K in effect, mainly as a place to dock some tIRA funds from previous employment to make a back door Roth happen.

I've been trying to get caught up on the benefits of getting 1099 IC income as an employed physician. Seeking advice for something I haven't yet see come up in the previous posts and articles unless I missed it somewhere.

I have a stay at home spouse, who happens to have a marketing/advertising degree. My question is the best way to use that to our advantage. In 2018, I may or may not have as much, if any, 1099 income. Will that change the ability to hire my spouse, i.e. does their employment have to be related to the side hustle? Would there be the same tax benefits if I hired her to create some sort of value in my W2 endeavors?

Or, do I talk her into creating HER business, and then I become the employee?

So much to learn...

 

[jfoxcpacfp]

bonebrokemefix wrote:

Seeking advice for something I haven’t yet see come up in the previous posts and articles unless I missed it somewhere.

Click to expand...

I have linked to this post several times on the forum, but it would be very easy to miss: 6 Huge Benefits of IC Income

bonebrokemefix wrote:

I have a stay at home spouse, who happens to have a marketing/advertising degree. My question is the best way to use that to our advantage. In 2018, I may or may not have as much, if any, 1099 income. Will that change the ability to hire my spouse, i.e. does their employment have to be related to the side hustle? Would there be the same tax benefits if I hired her to create some sort of value in my W2 endeavors?

Click to expand...

The answers to these questions could go in several different directions:

• You must have a business purpose to hire your spouse and deduct her wages. So, yes, her employment would have to be related to this or another side hustle.


• If your wife grows your business by using her marketing degree, then sounds like it could be a good idea.


• I cannot comment on whether she hires you, instead, as I have no idea what the business is and whether it would be appropriate for her to own it.


• Be aware that if your wife is not otherwise employed, you would owe taxes at the full FICA rate on her wages up to the first $127,200 (15.3%) while you are taxed only at 2.9% for Medicare only because you have surpassed that base. This is a significant disadvantage to consider.

You should consider hiring a CPA who is experienced in this area for advice, at least for the first year of IC income.

[bonebrokemefix]

Johanna that post was essentially the impetus for my question! And your zeal for the solo K is contagious; opened mine today! And later in clinic I saw a patient that was a self-employed machinery operator. I spent as much time telling him what I've learned from your posts on solo K and IC income as I did the treatment for his chief complaint.

[jfoxcpacfp]

Well, you just made my week. Thank you.