Husband and Wife to make simple decision

[TAXNJ]

Any benefit of taking guaranteed payments?

Or

letting profit and/or loss (husband and wife take a partner withdraw when need money) flow to the Ordinary business income (loss) (line 1 of schedule k1) vs. taking some amounts as guaranteed payments and balance of income as ordinary business income?

Simple scenario:

Husband and wife are 50-50 partners in their LLC business – Form 1065

Husband does the non-office work

Wife does the office work

Employees issued w-2s

[kathyc2]

Possibly to influence SS benefits. For example, if W was a stay at home Mom for a number of years, she may be in a position that 1/2 of H benefits may be more than her own. In that case you would want to shift more of SS wages to him.

[TAXNJ]

Shift

Possibly to influence SS benefits. For example, if W was a stay at home Mom for a number of years, she may be in a position that 1/2 of H benefits may be more than her own. In that case you would want to shift more of SS wages to him.

Do you mean shift more to W if H benefits may be more than her own?

[kathyc2]

No, shift more to H. Say they are close to retirement, same age and current projections are H 2,000/mo and W 800/mo. W would get a bump up to make beni 1,000/mo or 1/2 of H. In that situation it would make more sense to shift to H unless the CY would not replace one of the H lower 35 inflation adjusted years then it would not do any good.

Even if they are closer to same benefits, it may make more sense to shift more to one as after one of them dies the other gets to step into the higher amount. The closer they are to retirement the more sense it makes to do this. If they are younger, who knows what may happen by the time they are ready to draw benefits. Rules may change, they may get a divorce, etc.

[TAXNJ]

Thanks yes

No, shift more to H. Say they are close to retirement, same age and current projections are H 2,000/mo and W 800/mo. W would get a bump up to make beni 1,000/mo or 1/2 of H. In that situation it would make more sense to shift to H unless the CY would not replace one of the H lower 35 inflation adjusted years then it would not do any good.

Even if they are closer to same benefits, it may make more sense to shift more to one as after one of them dies the other gets to step into the higher amount. The closer they are to retirement the more sense it makes to do this. If they are younger, who knows what may happen by the time they are ready to draw benefits. Rules may change, they may get a divorce, etc.

Yes. They are middle age and when presenting various scenarios it is difficult to project the future especially who dies first and/or other unforeseen circumstances. Clients makes decision.

[kathyc2]

It doesn't matter which dies first. As long as they are still married surviving spouse gets the higher one whether it be theirs or their spouses.

Planning for SS benefits goes well outside the responsibilities of tax prep. I just think planning for the highest benefits is fun.

[TAXNJ]

Agree until...

It doesn't matter which dies first. As long as they are still married surviving spouse gets the higher one whether it be theirs or their spouses.

Planning for SS benefits goes well outside the responsibilities of tax prep. I just think planning for the highest benefits is fun.

Agree until having discussion with H & W about the issues especially if one of them goes to a nursing home without proper insurance, etc Yes, Planning for SS benefits goes well outside the responsibilities of tax prep and more to Elder Attorneys. Tough issues to plan but should be done to avoid possible major financial issues. Better to due than after the fact.