Welcome Guest. Register Now!  


Payroll Payroll related topics.


Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-30-2007, 10:09 AM
Junior Member
 
Join Date: Jan 2007
Posts: 14
Is it worth putting my spouse on Corporate payroll?

Dear TaxGuru,

I am expecting my income to be steady at about $180,000 w/o taking a salary. I was thinking of taking a salary of $120,000 and splitting the rest with my spouse taking abouth $42,000 and remaining would go to payroll taxes.

Can you please give me your comments on this approach?

Thanks in advance..

PS I saw the downloads on financial modules, hey these are not bad!! Ty.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 01-31-2007, 01:33 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
This is a great question!

On the surface, it appears smart to have your wive take a salary. This will enable her to contribute into the social security system with the long term beneficial outcome if you believe, that is, the social security system will be solvent.

I have also heard from loan officers that if both spouses have income it makes for a better credit rating on the couple. I am not 100% certain of this, but this seems to be opinion of some in industry.

The cost of putting your wive on the payroll after you have profits of more than $94,700 would be that she will be paying social security taxes along with medicare taxes, at a combined rate of 7.65% x 2=15.3%.

(Note Social security taxes = 6.2%, Medicare taxes = 1.45%)

Whereas, had you continued taking income after you reached this amount, you would not be subject to Social security taxes of 6.2% and an additional amount matched by your corporation of 6.2%. Hence, you would have saved 12.4% on $42,000.

Medicare taxes have no limits applied to salary, unlike Social Security taxes.

So, you have to decide whether this additional cost of 12.4% x 42,000 = $5,208 offsets the benefits discusses above.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.