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Old 12-05-2012, 10:56 AM
mach1axman
 
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1099 for Spouse under Sole Member LLC?

I have a small side consulting business. My wife does not have any income, however she helps me with the business throughout the year. Last year she did not have any income so I could not claim the child care tax credit. This year I want to make sure we show income for her so we can take the credit or deduction etc.

When I started the business I registered it as an LLC in Florida and I obtained an EIN. Currently my name and SSN is the only one registered across the board.

SO... what should I do? Is it better to add her to the business and EIN etc... or is it easier to just 1099 her?

At the end of the year I always get W9's from my customers.



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Old 12-05-2012, 09:15 PM
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“I have a small side consulting business. My wife does not have any income, however she helps me with the business throughout the year. Last year she did not have any income so I could not claim the child care tax credit.”------>EXCEPTION: A spouse is treated as having earned income(even if the spouse actually has earned no income) for any month he or she is a full-time student or is physically or mentally unable to care for himself or herself.
“ This year I want to make sure we show income for her so we can take the credit or deduction etc. When I started the business I registered it as an LLC in Florida and I obtained an EIN. Currently my name and SSN is the only one registered across the board. SO... what should I do? Is it better to add her to the business and EIN etc... or is it easier to just 1099 her?”----->I assume that your SMLLC(NOT MMLLC) is an unincoporated biz(neither as an S- nor a c orp) ; your LLC is a PS if you and your spouse are the sole partners , then, you may be considered a qualified joint venture, if you and your spouse are the only partners; you are filing a joint personal tax return on Form 1040;both of you materially participated in the partnership during If all of these circumstances are met, you can elect to file as a qualified joint venture instead of a partnership. You don’t need PS as you need to file complicated 1065(Sch K/K1/Sch E or etc). The IRS allows the qualified joint venture option only for "unincorporated businesses."The IRS spcifically excludes state law entities from filing as a qualified joint venture. So if you and your spouse own the LLC, you cannot make this election to be considered a qualified joint venture. You must each file a separate Sch C/ Sch SE ;you need to allocate the income and expenses according to the membership percentage for each spouse, then each share is recorded on a separate SchC/Sch SE for each spouses’s SE tax and soc sec benefits.. I mean say, each spouse has a 50% membership in a partnership (the LLC as a PS)which has an income of $100K, expenses of $70K, and profit of $30K.A Sch C is prepared for each of you, showing $50K in income, $35K in expenses, and $15K in profit.The total profit of $30K is shown on Line 12 of Form 1040, with the two Sch Cs as supporting documents. Preparing Sch C instead of a partnership return 1065 can save you time and money, but be certain that you qualify for this election. Check with your tax adviser before you file. OR you can hire your spouse an EE, issuing her W2 as your EE.then you need to withhold FICA taxes for your psouse. While the answer depends on your individual circumstances and the structure of your business, there are a few important areas to consider before putting your spouse on the payroll. Probably the major drawback to making your spouse an EE involves payroll taxes and workers’ compensation insurance. As with any EE, your business must pay employment taxes and workers’ comp on any wages paid to your spouse. And it must withholdFICA and pay FUTA or state level UN taxes on all wages paid . For example, if your spouse is an EEin 2013, your company and your spouse must each pay a 1.45 percent Medicare tax on all of your spouses wages with 4.2 percent Social Security tax deducted from theEE’s paycheck on the first $106,800 of wages and the company being responsible for 6.2 percent. The silver lining to this scenario is that typically the payment of these taxes will be a deductible business expense.
If the combined income of both spouses exceeds the Social Security maximums ($106,800 for 2012), then you may want to have the income on only one family member, so you can reach the maximum sooner. It also can make sense to have the spouse receive even a small salary, even a few thousand per year, to maximize Social Security benefits, since benefits are normally based on the higher of the two incomes or equal to one half of the spouses income. Another benefit of being on the payroll is that the couple has access to the child and dependent tax credit, which requires that both spouses work to qualify UNLESS your spouse is a full time student.

“At the end of the year I always get W9's from my customers.”---=--->As an IC(a self employer), you need to submit the form to yur customers;Form W-9 is the IRS form used by a company to request your TIN/EIN. You need to fill out W9 if you or your business are hired to provide services to another company/biz, I mean.



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