Husband and Wife Business Tax Consequences


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Greetings

My wife and I are in business together. We run a computer consulting business.

For tax purposes we have always just filed one Sched C and one SE under my name. I am lately thinking this may have been a mistake.

I am 53, she is 52 and now I am thinking of the golden years of retirement.

Her earnings statement says 0 every year.

Our intention is to work until we can't because we both love what we do. But that's not much of a retirement plan.

What if I kick at 62? What is she going to get?

So now is the time to plan and maybe I will need to file a correction for the past few years.

Here's the questions:

Should we be filing 2 Sched C's and 2 SE's with the business income and deductions split in half?

Thanks in advance for your time.
 
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This may address your future returns, but instead of filing two Schedule C's, you can hire your wife. You can then treat her as a W-2 employee, withholding and remitting the FICA taxes as you would with a regular employee. Becuase she is your spouse, the are certain exemptions from the FICA taxes that she may be eligible for, but your purpose is to build up the SS contributions account. So you would want to recognize all of her wages (and you could also give her bonuses to maximize her taxable income, and reduce your own wages to get her caught up) and pay SS tax on her earned income. I hope this helps. Please let me know if I can be of further assistance.

Regards,
Russell Tuncap, CMA, CPA
www tuncap.com
 
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