GRAB 5 QUICK TAX PERKS

             Does your business need trustworthy and reliable employees?  You may not have to look
any farther than across the dinner table.  Hire your spouse to work as an official employee.  Why put your spouse on the payroll?    Because you can gain five tax benefits:

-1-         If you meet the tax law requirements, your company can deduct contributions made to a qualified retirement plan on your spouse's behalf.  The annual limits are quite generous.  If your company has a defined contribution plan, you may put away up to 25% of their compensation or $49,000, whichever is less.  With a 401(k) plan, another dollar limit applies:  Your spouse can defer up to $16,500 to the plan plus an extra $5,500 if they are age 50 or older.  Your company can match those contributions wholly or partially up to tax law limits.

-2-          If you operate a C corporation any compensation you pay to your spouse would have to stay with the company.  Assuming your corporation is in a higher tax bracket than your personal tax bracket, you will save tax overall if your spouse draws a salary.  But don’t look for any income shifting tax benefits if your company falls in a lower tax bracket than your personal bracket.

              Note:   S corporation owners and sole proprietors don’t pay corporate income tax.  You report business income on your personal return whether or not you pay your spouse a salary.  Therefore, this could be a wash.

-3-          Generally, you can’t deduct the travel expenses attributable to your spouse if he or she accompanies you on a business excursion.  However, if your spouse is a bona fide company employee and goes for a valid business reason, you may deduct their travel costs, including air fare, lodging and 50% of the meal expenses.  The benefit also is tax free to your spouse.

-4-          If you’re already paying more to cover your spouse under your company health insurance plan, hiring him or her shifts the expenses to your company.  Typically, your company can deduct your spouse’s full health insurance ne cost.  Even self employed can write off 100% of the cost under a so-called Section 105 medical reimbursement plan.

 

-5-          Your spouse is entitled to the same group term life insurance cove rage as your other employees.  Key point:  The first $50,000 of employer paid, group term coverage is tax free to an employee.    However, one catch for S corporation owners:  Generally, you can’t deduct fringe benefits, such as grout term life insurance, for any employee who owns 2% or more of the company.  By extension, that rule also applies to an employee spouse.

                

               Call on us. So if you know someone that is looking for a way to save taxes and remain invisible to the IRS, call me at 702-642-8953 or write me at isueirs@aol.com. With me you get No conditions. No exceptions. No time limits and No IRS.