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Should I Make My Spouse My Business Partner?
Should I Make My Spouse My Business Partner?
Tax reform changed the rules of the game when trying to choose your best tax structure for your business. In looking over the possibilities, we note that a properly structured spousal partnership could be your best choice. As always, there are benefits as well as potential issues that you should be aware of.
A brief overview of the potential partnership looks like this:
You own an existing sole proprietorship or want to start a new business. You and your spouse then form a general partnership or limited liability company to manage the business and provide cash or property for your interests in the new business. But – your spouse does NOT participate in any way in the business – they are merely an investor.
Here are the tax benefits to you:
- Your spouse’s income is free from self-employment tax.
- You and your spouse both still qualify for the new pass-through income deduction under Section 199A.
- The IRS audits partnerships at a much lower rate than proprietorships (Schedule Cs).
- You don’t have to worry about the costs or hassle of running payroll or determining your reasonable compensation as you would if you operated the business as an S corporation.
Here are the potential issues:
- The passive activity rules limit your spouse’s use of any losses against regular income.
- Your cost of preparing a partnership return (but you’d have this cost with an S corporation too).
If you would like to discuss how your choice of business entity works in today’s tax environment, please call us today at 844 229 8936 to schedule your complimentary consultation. We can help you legally reduce your tax liability.
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Introduction: In the gripping narrative of "The Walking Dead: The Ones Who Lived," characters are thrust into a world of constant threats and uncertainties. At Golden Tax Relief, we understand that while tax season may not involve literal zombies, the feeling of dread and complexity can feel just as daunting. Let's explore how the survival tactics employed by the show's characters can be a metaphor for effective tax planning and how our team can be your ally in this journey. Survival against Odds: Just as the survivors in "The Walking Dead" face a new world of challenges, taxpayers encounter the labyrinthine complexities of the tax system. Preparation and knowledge are your armor and weapons. At Golden Tax Relief, we arm you with the latest tax strategies and regulations, ensuring you're well-prepared long before deadlines approach. Our expertise is your guide through the treacherous terrain of tax season. Community and Contribution: In the post-apocalyptic world, strength lies in numbers and collective wisdom. Similarly, in the realm of tax planning, leaning on the expertise of professionals can make all the difference. At Golden Tax Relief, we foster a community approach, working alongside our clients to understand their unique financial landscapes and ensuring their contributions work in their favor. Like a well-coordinated survival group, we combine our strengths to protect and advance your financial well-being. The Threat of Penalties: In the world of "The Walking Dead," the consequences of missteps can be severe. In the tax world, mistakes can lead to audits and penalties. Our role at Golden Tax Relief is akin to that of a vigilant lookout, helping you steer clear of common pitfalls and ensuring compliance with all tax laws and regulations. We stay at the forefront of tax legislation to shield you from unexpected threats and keep your financial journey on track. Unexpected Challenges and Adaptability: Just as the survivors in the series must adapt to new threats and environments, so must taxpayers in the face of changing tax laws and personal circumstances. Golden Tax Relief prides itself on our adaptability and foresight. Whether responding to an IRS notice or adjusting strategies mid-year, we're equipped to help you navigate the ever-evolving tax landscape with confidence. Resource Management: Resource management is crucial for survival in "The Walking Dead," as it is in effective tax planning. Maximizing deductions, strategizing for future tax liabilities, and ensuring efficient financial planning are paramount. At Golden Tax Relief, we approach your financial health holistically, ensuring every decision is made with your best interests and long-term stability in mind. Conclusion: While the stakes may differ dramatically between a zombie apocalypse and tax season, the principles of survival remain the same: preparation, community, vigilance, adaptability, and resource management. At Golden Tax Relief, we embody these principles in our approach to tax planning, ensuring you're not just surviving tax season, but thriving beyond it. Let us guide you through the complex tax landscape, providing peace of mind and a clear path forward. Welcome to a new era of financial survival, with Golden Tax Relief leading the way.
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Its time for some good news for those S Corp Owners who own more than 2% of your S Corp: there are some good updates when it comes to your health insurance. First things first -- ensure that your health insurance deductions are in order, and avoid the $100-a-day penalties for violating the rules of the Affordable Care Act (ACA). To do this, take the following steps: Get the cost of the health insurance on the S corporation’s books, either by making the premium payments directly or through reimbursement. Ensure that the S corporation includes the health insurance premiums on the owner-employee’s W-2 form, including the additional compensation in box 1 but not in boxes 3 or 5. If you are an owner-employee with more than 2 percent ownership, claim the health insurance deduction as “self-employed health insurance” on line 17 of Schedule 1 of Form 1040. However, there are 2 rules you must meet: not having access to employer-subsidized health insurance and having adequate salary. While the S corporation does not have to provide health insurance benefits for its rank-and-file employees, but if it does, it must use an acceptable ACA plan, such as (among others) the qualified small employer health reimbursement arrangement (QSEHRA) or the individual coverage HRA (ICHRA). Its important to note that the S corporation can reimburse more-than-2-percent owners for individually purchased insurance without any penalties, BUT if it reimburses rank-and-file employees without using the QSEHRA or ICHRA, it faces the $100-a-day penalty per employee. If you are looking to provide health benefits to employees through the S corporation, there are many tax-advantaged options available. If the S corporation provides group health insurance to all employees, including the shareholder-employee, the same rules apply. This, and many other important tax savings strategies could help save you thousands of dollars each year through a qualified tax plan! Call us today at 844-229-8936 to set up an appointment with our certified tax planner and tax coach! Let us put you on the path to savings!
