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Old 08-30-2009, 07:59 AM
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Which type of corporation?

I am proposing setting up a corporation, with me, my wife, and daughter. My wife and i have income (contract) but no deductions. My daughter has deductions, but no income. Currently, my wife and I get murdered on schedule C, as we get 1099's. If the three of us incorporate, and we give the companies we work for our tax ID numbers, then we will greatly reduce our tax liabiliy, especially seeing as my wife and I have itemized deductions we are not allowed to use to offset schedule C income.

My queston, though, is if I incorporate, say, tomorrow, as long as my "employer" lists all of my 2009 income under my new corporate tax ID number, will I be Ok to put it all into the corporation.

Am I correct here ? Do you see any problems with this plan?

Thanks.


Last edited by keith brown : 08-30-2009 at 08:08 AM. Reason: typo


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Old 09-11-2009, 12:08 AM
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I think that if you put your daughter on the payroll of the corporation, clearly, you would save on your income taxes for the reasons that you have mentioned above.

This is not something new, however, as far as the IRS is concerned, your daughter must perform some meaningful services that is commensurate with the her compensation. Thus, it is important that both your daughter perform a function for the corporation that is verifiable and furthermore, she must receive a reasonble compensation.

The IRS would not allow a unreasonable compensation for a very limited amount of hours that your daughter performed for the corporation.

In conclusion, I am sure that you can employ your daugther and put her on the payroll for a nominal salary provided she performed a specific function for the corporation. The key here is reasonable salary and perform work that can be verified by the IRS.

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