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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  Nearly 30 years of varied tax industry exp. Tax Biz owner
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My wife eants to start a business as a sole pripriorship using

Customer Question

My wife eants to start a business as a sole pripriorship using her own name and hire me as 1099 contractor, if we file married but seperate will this be benifical
Submitted: 9 months ago.
Category: Tax
Expert:  Tax.appeal.168 replied 9 months ago.
Welcome. Thank you for choosing us to assist you. My name is XXXXX XXXXX my goal is to help make your life, a little... less taxing.

As a sole proprietor, any income and expenses from the business will flow through to the 1040. It is usually not advantageous for married couples to file married filing separately. Filing separately, you both will be taxed at the single tax rate. Why are you considering filing separately?
Customer: replied 9 months ago.

My wife has a current income of 60000, she will not be leaving her current job. The business will be in her name for finacing reasons, but I will be runing the bussiness.the bussiness is subcontracting for a furnature delevry service. I can either be a 1099 contractor for her or a paid employ. If we file seperate and I make 60, 000 a year from which will be the majority of income from the bussiness it will be taxed at a lower rate then adding it on to her 60000 a year we could even possaly show the busdiness as not making any income at all what do you think?

Expert:  Tax.appeal.168 replied 9 months ago.
Several matters to address here.

1) Subcontractor vs. employee. The IRS is very particular about employers who misclassify employees as subcontractors. If you meet the requirements to be classified as an employee, it would be in your wife's best interest to classify you as such. For more detailed info, refer to the link below:

http://www.irs.gov/uac/Employee-vs.-Independent-Contractor-%E2%80%93-Seven-Tips-for-Business-Owners

------------------------------------------

2) For simplicity sake, let's say that you will be the GM of the business, and you will be earning approx. $60,000/year. How much gross income do you anticipate the business earning?

You stated that your wife earns $60,000 a year on her current job, and you will be earning approx $60,000 year as well working for her. So this is $120,000 in total. Based on the $120,000 income (your earnings and hers), whether you file married filing jointly or married filing separately, you will fall under the 25% tax bracket. Refer to the 2013 tax bracket tables at the following link;

http://www.bankrate.com/finance/taxes/tax-brackets.aspx

3) As for the business showing a loss, the filing status will have no bearing on that. The business with either show a profit or a loss.

Does this shed a bit more light on the situation for you? If not, let me know. If you are clear on matters, please remember to positively rate my answer.

As we know that you have choices, we thank you for choosing this Q&A service.
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 2499
Experience: Nearly 30 years of varied tax industry exp. Tax Biz owner
Tax.appeal.168 and 2 other Tax Specialists are ready to help you
Expert:  Tax.appeal.168 replied 9 months ago.
Thank you very much for the high positive rating and the bonus. I do appreciate it.
Expert:  Tax.appeal.168 replied 9 months ago.
Hello again,

Something that I forgot to mention that was brought to my attention by another expert, California is a community property state, so even if you were to file separately, 50% of your wife's earnings would have to be reported on your tax return and vice versa. In my opinion, it is more complicated for a married couple to file separately in a community property state. For more information on community property states, you can refer to the IRS Pub 555

http://www.irs.gov/pub/irs-pdf/p555.pdf

Thanks again.

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