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When you receive SS benefits before your full retirement age (which I assume is 66 in your case), then you are only allowed to have a certain amount of other income before your SS benefits are reduced.
If you work but start receiving benefits before full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit. In 2009, the limit is $14,160.
So if you are still doing business as a sole proprietor, if your annual earnings are more than $14,160, it will result in the SS benefits you receive being reduced according to the above formula.
There is no way for you to "draw a small income" from the business. All of the income that you earn as a sole proprietor is taxable in the year it is earned, regardless of whether you actually draw that money out or leave it in the business account.
So depending on just how much your income is from your business, you may want to reconsider whether it is really worth while to take early SS benefits, as the reduced benefit would be the same payout you continue to receive from now on. If you wait until full retirement age, your annual benefit amount will be considerably higher, and at full retirement age you can continue to work and not have your benefits reduced, regardless of the amount you still earn from your business.
As long as the income from the business is being reported under your wife's name and not your name, then that income would not be taken in to consideration when determining if your benefits needed to be reduced.
So yes, you could receive a 1099 from the business if you put the business in your wife's name.
Hello again Mob,
No, you cannot simply have the income from the business diverted to your wife or anyone else. The business would actually have to be registered in her name for the income to be considered hers.
If you wanted to keep the business in your name, you could pay your wife a salary if she helps you with the business, and the salary you pay here would then reduce the income of the business. So that may be an option you want to consider.
Thank you Mob
I believe I just explained to you what your options are. There really are no other "best ways" to go about doing this.
If you feel that drawing your benefits at age 62 will be in your best interests, then you will just need to keep in mind that if you personally continue to have annual earnings of $14,160 or more, then those benefits will be reduced accordingly.
That being the case, you can either make it a point to be sure your earnings stay below that level, or you can put the business in your wife's name, or you can begin paying your wife a salary to help reduce the income reported under your name. There really are no other options, and only you can decide which of these will work best for you.