Split business income between H & W?

[KJ Judd]

Husband & wife work in chiropractic business. Legally the LLC is only in husband's name. Due to child support calculations, they are looking for a way to separate the income husband brings in from income wife brings in. (Both have their own clients.)

He wants to pay wife as an independent contractor. If so, I think he also needs to charge her some portion of her billings to cover the overhead (similar to if he had an unrelated associate.) My other thought is to add wife as a member to the LLC and split the income 50/50. Thoughts?

[Jiggers]

Splitting income

Pay her as an employee, issue W-2.

[Bird Legs]

Partner - Independent Contractor

Do not believe considering wife to be an independent contracor would work. Does she
provide her own equipment, etc.?
How about an employee? Issue her a W-2. Not subject to Soc. Sec. M/C or Federal unemployment.
If not then a partnership agreement.

[joanmcq]

Why would a W-2 to a spouse not be subject to SS, medicare, or FUTA?

[Jiggers]

Spouse W-2

Do not believe considering wife to be an independent contracor would work. Does she
provide her own equipment, etc.?
How about an employee? Issue her a W-2. Not subject to Soc. Sec. M/C or Federal unemployment.
If not then a partnership agreement.

Bird Legs,
A spouse as an employee is subject to SS, Med, and Withholding. A spouse in most states is not subject to state unemployment and she would not be subject to FUT.

[Bird Legs]

Mea Culpa

My error. 99 lashes with a wet noodle.
Spouse is subject to SS & M/C. But not Federal Unemployment Tax and possibly
not state unemployment tax.

[KJ Judd]

That's good to know on the unemployment insurance. Right now the SS & Medicare isn't an issue because he's not over the limits. Although they have no other employees, so we'd need to do payroll filing.

[Jiggers]

Hiring spouse

That's good to know on the unemployment insurance. Right now the SS & Medicare isn't an issue because he's not over the limits. Although they have no other employees, so we'd need to do payroll filing.

No employees?

Does he provide health insurance for his employee (spouse) and her spouse (him) and deduct it on Schedule C versus an AGI adjustment on the 1040?

Does he provide a medical reimbursement plan for all his employees (spouse) that covers her spouse (him) and deduct the expense on Schedule C versus on Schedule A, limited to 7.5% of AGI?

Does he provide group term life up to $50,000 for his employee (spouse) and deduct the premiums on Schedule C?

Why not?

This only works with the wife getting a W-2.

[RLymanC]

Retirement

How about a SEP/IRA

[S T]

Child Support Issue

Since in the original post there was a reference to the Husband (sole member of the LLC) wanting to protect and lower his income for child support issues, Attorneys and District Attorney's office are going to look at the financial records, so it would seem the W-2 to the spouse might not be the most advantageous. I think those agencies would see through the shifting of income.

Might it be better that the wife (spouse) is added as a member to the LLC, and elect to file as a partnership which would separate out her income from his, and any inequities due to client billing or equipment ownership somehow be handled through a guaranteed payment (not clear on that ruling)

Another consideration would be to share expenses somehow, but each the husband and wife have their "own" separate LLC. Not quite sure how you would set that up, but if possible then he would report his own income and take his own business expenses and likewise she would as well.

Sandy

[Davc]

Since in the original post there was a reference to the Husband (sole member of the LLC) wanting to protect and lower his income for child support issues, Attorneys and District Attorney's office are going to look at the financial records, so it would seem the W-2 to the spouse might not be the most advantageous. I think those agencies would see through the shifting of income.

Might it be better that the wife (spouse) is added as a member to the LLC, and elect to file as a partnership which would separate out her income from his, and any inequities due to client billing or equipment ownership somehow be handled through a guaranteed payment (not clear on that ruling)

Another consideration would be to share expenses somehow, but each the husband and wife have their "own" separate LLC. Not quite sure how you would set that up, but if possible then he would report his own income and take his own business expenses and likewise she would as well.

Sandy

I think they could see through the shifting of income regardless of how it's accomplished. However you could avoid workmen's comp as a owner.