Outside Labor

[Bird Legs]

Situation: The wife, disabled, physically cannot drive, makes items & sells them on E-Bay.
Sales will average between $1,500 & $2,500. per month. Husband takes these items to Post Office for mailing, also takes wife to seminars, to stores for supplies, etc.
Question: Can the wife pay husband contract labor and deduct it as an expense on her
Sched. C?
Husband is self-employed and would pick this payment up on his Sched. C.----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[JG EA]

Benefit?

If from one C to another what benefit would it be? Would it be better to just reimburse the husband for mileage?

Perhaps she needs to limit her income because of disability? Then I would check with the government authority paying her disability as to what expenses can be taken off her income. That would probably be the best thing to insure there would be no problem with an important payment. (If that is the case.)

Then depending on what they say, decide what would be the best way to report. Paying him for his time or just reimbursing expenses.

[Bird Legs]

JG EA, Thanks for your response and

You are correct. The wife is receiving Disability Soc. Sec. The most she can net is
$10,020. per year. She is now 60. In about 5 years, when she becomes 65, there will
be no maximum. Unless the law changes raising the age limit.
There is no problem in 2005 because this is her first year doing this and the cost of
equipment, continuing education, etc will compensate.

[taxmandan]

2 Sch Cs

If from one C to another what benefit would it be?

Often shifting income and contributions to Social Security account of the spouse can make sense. Depends on their situation, but sometimes if the spouse (husband in this case) doesn't have other wages contributing to his SSA it can be useful for building quarters of eligibility or increasing his ultimate SS benefits. Sounds like they are both close to or at the age to collect SS, so it may not do much for him.

For younger self-employed folks with a non-employed spouse they can shift income and both have disability coverage under Social Security. The disability coverage under SS can't be matched for cost of premium and benefits by any private insurance, hence important to keep eligibilty with sufficient quarters of payments for a person who doesn't have a wage job.

[Black Bart]

To contract or not to contract?

Question: Can the wife pay husband contract labor and deduct it as an expense on her
Sched. C?

Gosh, Bird, your clients always sound so much like mine. It's very refreshing!

I'm a little hesitant to hand out advice to you ever since last year when I got trounced by all those pettifoggin' accountants for telling you that your client could rent out her car and put it on Schedule E (you can "get by" with it--I've done it). Still, I can't resist. So, the answer is yes. Perfectly simple; make him a 1099, file it on his and hers, and that'll be the end of it.

Now; in the unlikely event that you want to make a federal case out of it; all kinds of questions arise (taken from Form SS-8, Determination of Worker Status. Is he an employee or an independent contractor?

The answer to that is determined by the answers to various other things: What instruction is given (does she tell him get up and hit the road or is he a self-starter)? Must he secure prior approval of actions while on the job (can he run out for a coke and cigarettes without asking)? To whom do the tools belong (is the car in his name or hers)? Is the job done with or without her oversight (does she tell him where to drive, when to drive, how to drive, and, if yes, does she do it from the back seat)? Does he get an allowance (I beg your pardon--I mean does he get a mileage reimbursement)?

Good luck!

BB

[S T]

SSA Disability and Employment

Bird, I found the following on the SSA website. The limitations to working and earnings while receiving SSA disability appear to be different than the under full retirement age limitations.

How much can I earn and still receive Disability benefits?

Question
I am receiving Social Security disability benefits. Will my benefits be affected if I work and earn money?


Answer
We have special rules called "work incentives" that help you keep your cash benefits and Medicare while you test your ability to work. For example, there is a trial work period during which you can receive full benefits regardless of how much you earn, as long as you report your work activity and continue to have a disabling impairment.

The trial work period continues until you accumulate nine months (not necessarily consecutive) in which you perform what we call "services" within a rolling 60-month period. We consider your work to be "services" if you earn more than $620 a month in 2006. For 2005, this amount was $590. After the trial work period ends, your benefits will stop for months your earnings are at a level we consider "substantial," currently $860 in 2006. For 2005, this amount was $830. Different amounts apply to people who are disabled because of blindness.

For an additional 36 months after completing the trial work period, we can start your benefits again if your earnings fall below the "substantial" level and you continue to have a disabling impairment. For more information about work incentives, we recommend that you read the leaflet, Working While Disabled-How We Can Help (SSA Publication Number 05-10095).

Question
How much can I earn and still receive Social Security benefits?

Answer
SSA uses the formulas below, depending on your age, to determine how much your benefit must be reduced:
Click here to find out what your FRA is: http://www.socialsecurity.gov/pubs/ageincrease.htm


Note: There are different rules for people receiving Social Security Disability.


If you are under full retirement age (FRA): when you start getting your Social Security payments, $1 in benefits will be deducted for each $2 you earn above the annual limit. For 2006 that limit is $12,480 and for 2005, that limit is $12,000. Remember, the earliest age that you can receive Social Security retirement benefits remains 62 even though the FRA is rising

Hope this will help in your planning.

Sandy

[Bird Legs]

Black Bart, the

Husband says that the wife tells him what to do all the time, not just when they are
in the car.
Husband,over 65 and draws full Soc. Sec. benefits, is self employed with an office out side
the home. Husband has to drive wife to get supplies, to take her to classes, continuing ed. classes, fully deductible, to organizational meetings, etc., in addition to writing off the mileage.
Wife immensely enjoys doing her craft work and selling it on E-Bay.
But her net income is limited because she is "only 60" and she is drawing S S Disability.
Wife was wondering if she could compensate husband for his time, issue 1099, and deduct
it on her Sched. C., in order to keep her net income under the maximum allowed.

[Gretel]

Employee

It appears to me that he is her employee in business, and her servant at home. 'cause she can pay him wages, which he probably earned hard enough but she will be in trouble with the employment tax forms now.

[Black Bart]

1099

Wife was wondering if she could compensate husband for his time, issue 1099, and deduct
it on her Sched. C., in order to keep her net income under the maximum allowed.

Don't see why not. I would.