Daniel HonanFounder, Profitable Painter CPA PLLC · I help painting contractors increase profits & cash flow while reducing taxes♦ Bookkeeping ♦ Tax

Painting Biz Owners: Maximize Tax Savings—Know the Pros/Cons of Hiring Your Spouse! #YearEndTaxTips

Name: Painting Biz Owners: Maximize Tax Savings—Know the Pros/Cons of Hiring Your Spouse! #YearEndTaxTips
Uploaded: 2024-12-16T14:15:02+00:00
Duration: 54 s
Channel: Daniel Honan
Description: In this segment, Speaker B advises small business owners on the pros and cons of hiring a spouse. The key points are: both spouses should only be placed…

16 Dec 2024 · 1 min

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In this segment, Speaker B advises small business owners on the pros and cons of hiring a spouse. The key points are: both spouses should only be placed on payroll if they materially participate in the business; adding a spouse triggers payroll taxes (FICA) which should be avoided unless the spouse has an integral role or the owner wants to fund the spouse’s 401(k). Additionally, a health reimbursement arrangement (HRA) can be used to offset medical expenses by making the spouse an employee, allowing the business to contribute tax‑free toward those costs. The overall message is to be cautious and purposeful when involving a spouse in the business to preserve both marital and tax benefits.

Chapters

Just to be clear, you just don't like husband and wives working together in their businesses?
I'm trying to preserve marriages. I'm like the Dr. Phil. If you and your wife or you and your husband are working together in the business, both materially participating, then yes, you should both be on payroll. Sometimes folks will come and say, hey, it's 99% my business, should I bring my spouse in maybe part-time? The answer is usually no. When you pay your spouse wages, you're also paying payroll taxes. I want to avoid FICA unless there is a good reason for them to be involved, like they're an integral part of the business, or maybe you want to fund their 401k from the business. And then health reimbursement arrangement— if you have a lot of medical expenses, it can be very, very difficult to get tax deductions for those. Itemizing sucks. So some people set up a health reimbursement arrangement inside their business. Their spouse becomes an employee. Now the business can help contribute towards paying for those medical costs.