Sch C -spouse employment

[oceanlovin'ea]

Husband has Schedule C business, delivers appliances for major store. He had 2 employees during year. Also had 3 people he paid as subcontractors. ( I think that is okay as he used them to drive another truck for him) He also paid wife $6000 during the year. She went out to people's homes when there was a damage claim and took care of whatever needed to be fixed. She also does his office work.

My question is since he is a schedule C business, is there any advantage to claiming this payment to wife as an expense? Take it off his return and then she has to do a Schedule C and the end result is the same tax due. The only advantage I can see is that she would have some social security earnings in her name.

Situation will change for 2006 as he incorporated as of 1/1/06.

Thanks, Linda F

[Bill Tubbs]

employee benefits

Well, if wife was an employee, part of her benefit package could be reimbursement for out-of-pocket medical (a Heath Reimbursement Plan). Depending on the different classes of employees, he may be able to get by with just offering it to the class of employee that (woo-lah!) only his wife fits into.

Well, guess she wasn't employee for 2005, but maybe consider the employee benefits angle for 2006.

>>He also paid wife $6000 during the year<<

Well, did he pay her as an independent contractor? If so, yes, expense it on his return, and add a C-EZ for her.

Most likely this will probably be a wash as far as SE tax goes. Don't know either of their SS histories, so don't know if this would help/hinder that, but what's done is done. (He paid her, so it needs to be reported as such.) Also, if he was over $90,000 in Sch C net income, this will increase their overall SE tax for 2005.

Bill