add wife as employee for Soc Sec reasons...

Discussion in 'Business Operations' started by thes, Jul 26, 2006.

  1. thes

    thes LawnSite Member
    Posts: 106

    Has anyone done this? How do I go about doing it?
    My wife does the bookkeeping, billing, helps with mulch jobs, clean ups, plantings, errands, etc. Since we pool all of our finances anyway, it's not gonna make a bit of difference on what our income is at the end of the year. And I've heard that I wouldn't have to cover unemployment for my spouse....just the payroll taxes. Where do I begin? Help! :confused:
  2. EMWEB

    EMWEB LawnSite Member
    Posts: 145

    Talk to a pro. There are a lot of things to be considered you may not be thinking of. Do you have employees . . . will you have to cover her with workmen's comp? is just a start of the quetions to be asked . . .
  3. thes

    thes LawnSite Member
    Posts: 106

    I'm a sole proprietor and I work by myself (70+ weekly & bi-weekly mowing accts)...sometimes our 18 son helps out after he gets out of work.
  4. olderthandirt

    olderthandirt LawnSite Platinum Member
    from here
    Posts: 4,900

    Put the business in HER name and register with the state. She will get preferencial treatment on certain contracts [Minority owned business]
    CPA and a good attorney will fill you in on what you need to know
  5. EMWEB

    EMWEB LawnSite Member
    Posts: 145

    In that case I would still run it by a knowledgeable tax person . . .

    But sounds like a good idea, thinking ahead . . .
  6. hmartin

    hmartin LawnSite Senior Member
    Posts: 590

    Start paying her like an employee. Do she have all of her credits to get social security? Isn't it 40 credits that you have to accumulate?
  7. hickslawns

    hickslawns LawnSite Member
    Posts: 131

    Here is a better idea. If you do not plan on adding any employees, then do not add her. If you have it setup for one employee you might as well have 10. There is just as much work to set it up. Not difficult, but talking to a professional I would second. If you are going to pay her as an employee you will need to pay into workers comp, pay her fed income tax out of her check, match it as the business matches what employees contribute, etc. There will be more costs. If you are paying her $10/hour it might end up being more like $13-15/hour cost for the business when you are done and she will receive maybe $8/hour after taxes. So why not take the extra money and make an IRA/401k type contribution to your retirement account? Even a money market account, bond, CD, anything but giving it to the government. How do you know it will be there when you need it? Granted your investment could go to pot as well, but there are conservative investments for your retirement you can make. I guess the only benefit you will have is possibly with medicare/medicade or possibly social security check someday. If the liberals have it their way we will all be on govt healthcare like Canada eventually anyway. Just an idea for what it is worth.
  8. thes

    thes LawnSite Member
    Posts: 106

    Thank you all for the replies.
    If anyone else has any other ideas...feel free to add.
  9. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Posts: 1,010

    Just pay yourself more and give her money out of that.You don't have to add her for SS reasons.She'll get to draw half of what your SS is anyway,even if she has never worked a day.(One reason SS is in a bind)
    At 65,if you're still working,she can draw half of your SS.When you hit 65.5,you can draw and she can draw.If you pass away,she can draw the full amount.
    SS isn't like a bank account where you put money in and you get your money back.It's based on your last three years income level and comes from a pool of money paid by those currently working.In other words,you're paying for someone elses SS now,and someone else will pay for yours when you retire.
  10. ed2hess

    ed2hess LawnSite Fanatic
    Posts: 13,207

    I am not a tax guy or account but did stay at Holiday Inn. What I guess your situation may be is you have already got enough credits towards social security to get the maximum benefit. And maybe your wife has not got enough credits, or any credits. To get her more credit you could pay her a big salary. This would help her towards getting more SS. I could never get an answer from IRS on how much money was needed for how many years to get full credit. It seemed like a little secret. I know you can't just plow $100K in one year and qualify for full benefits. But if you could put in $10K for 15 years that would be good.

    I don't know if an account can help, or a tax advisor, or tax lawyer but you need to look into this.

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