"K.H." <kh3452000[at]yahoo.com> wrote:

- quote -

"For the above trick to work" tells you the answer: the word
'trick' is the clue.

Newsgroup content, for the most part, is accessible to the
general public and the governament (e.g., IRS).

If your wife performs valuable services to your business,
you need to adequately compensate her for those services.
The benfit here is in the retirement contributions that may
be made if your business has a retirement plan (e.g.,
SEP-IRA), not MFS vs MFJ.

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Nothing illegal about choosing to file married separate.
However, try it both ways.....99 to 1 you are better off as
married joint. Of course, if you are in a community
property state AND LIVE TOGETHER, half your income is hers
and half hers is yours so you end up within a few dollars of
the same result anyway.

Nan, EA in LA

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K.H. <kh3452000[at]yahoo.com> wrote:

- quote -

I'm not sure if the separate $9150 deduction works or not.

But as for her having an income, you can pay you whatever
you like for her services. So I would think you can write a
1099. In order to make sure this looks kosher, I think you
would write a check to her from your sole proprietorship (or
your personal account if you don't keep the business
separate). She would send a separate 10404ES (due January
15) for her "income". She might also have to fill out a
form for "underpayment of estimated taxes", but it wouldn't
actually cost anything except the time to fill out the
forms. She would simply show that all her income was
received in the last quarter.

This is for discussion purposes only, and is not tax advice.
I'm not a lawyer or tax professional. If you want tax
advice, hire a professional.

--
I pledge allegiance to the Constitution of the United States
of America, and to the republic which it established, one
nation from many peoples, promising liberty and justice for
all.

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K.H. <kh3452000[at]yahoo.com> wrote:

- quote -

If you are in a community property state, you have issues
with which to contend and I won't deal with them here.

If not a community property state, you really should each be
in the same tax bracket before you will find much benefit to
filing MFS.

If she actually did the work justifying payment of a
generous salary, and it had better be a proper amount for
the work she did, then regardless of whether you file MFJ or
MFS you should pay her a salary.

Both of you will pay FICA, and at your level of income, you
would have phased out Social Security 6.2% x 2 payments,
while if you hire an employee you will pay the full 6.2% and
she will pay the full 6.2% up to her phaseout amount. And
you will also pay other payroll taxes as well.

So to answer your questions:

1. If she is truly your employee you should be paying her a
proper amount for the work she does. This likely will
cost you more.

2. You would have to run the numbers, but unless you are
both in the same tax bracket, in which case you would
both be in danger of phasing out the dependency
exemptions, it is just not worthwhile filing MFS.

I say this as an Ohio preparer who prepares many MFS returns
each year, since Ohio tax rates encourage filing MFS.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Assuming that our AGI is over ~300K (personal exemptions are
completely phased out), shall we file separately so that my
wife can claim our two kids as her dependents so that we can
have an extra $9150 deduction? (Or is this a path we
shouldnt take because we get into trouble with IRS?)

If the answer to the above question is yes, then the problem
I have is that my wife (on paper) doesn't have a job. In
fact, I have a sole proprietorship (software development) in
which my wife helps me but we never in the past officially
acknowledged her as an employee or gave her a 1099MISC. For
the above trick to work she needs to have some income from
the sole prop. Shall we give her a one time 1099MISC at the
end of the year and get away with it?

Thank you very much
Best regards
K.H.

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