hi mark Kohler here with the tax and legal tip talking about putting your
spouse on payroll now for those of you that are small business owners this is a
big question mark I get this call and email quite a bit so let's dive into it
and let me give you a couple options to think about and what makes sense because
it's not always the right answer to put your spouse on payroll all right let's
put this into context because it's getting give you some framework of how
we play out with this now remember a lot of my videos we're talking short term
long term ordinary income on this side passive income on this side and think of
this like your LLC that you might be buying a rental property and it's
creating passive cash flow and then over here those of you male or female that
are running the small business the S corporation you're having to put
yourself on payroll and that's when you start to think well should I put my
spouse on payroll now I know this may seem like a a whirlwind here and a lot
of information but I want to just give you the basics and please check out my
other videos on YouTube that are gonna help fill in some of the blanks like
hiring your kids under age 18 or over H a team that plays into this and but most
importantly on my website at Mark J color com I've got a tax and legal
library like 6070 videos some a half hour long going in depth into all these
different topics so if you have nine videos just on health care you'd love
them it's a just a few hundred dollar investment and you get access lifetime
access as long as I'm alive shooting videos and I've been doing it seven
years now and I shoot new videos every year so if this seems overwhelming spend
a couple hundred bucks a few hundred bucks I need a three hundred dollars you
get access to all these videos over and over again to watch this in depth so
check that out now putting this into context first your spouse may be running
the real estate okay cool they don't have to take a salary from
that when you run your own rental properties you're gonna just take
passive income drawers whenever you want so don't think that you have to put
someone on payroll to one or to run your passive or rental income that's okay
you're fine there now over here on the S corporation side this is where the
entrepreneur or business owner spouse that's primarily running the corporation
they're going to be probably the hundred percent owner which is typical you don't
need to make your other spouse the part owner in order to get the tax benefits
I want your spouse on here as a board of director and an officer and when you're
doing your annual minutes we have a little company maintenance system to get
you your minutes caught up if you need that check out the information below on
the law firm but board of directors officers I'd even want your adult
children or best friend on your board of directors and officers but your spouse
doesn't need to be an owner now you're gonna be taking the the business owners
gonna be taking the primary salary and then that's when the question comes in
well do I put my spouse on payroll now hopefully that puts it in context I know
that's kind of a whirlwind and again watch the more in-depth videos on my
site now let me say why you don't pick your spouse on payroll do not think that
putting them on payroll is good for Social Security the spousal benefit in
the and you can read about this at ssa.gov is oftentimes nine times out of
ten greater than trying to put your spouse on payroll you're gonna pay all
the spike up this Social Security and Medicare and you think it's going to
come back to your spouse dollar-for-dollar and Social Security it
may not in fact oftentimes it doesn't it's better for them to claim Social
Security under a spousal benefit so number one don't think Social Security
is the reason to put them on payroll so that brings me to only two reasons why
you may put your spouse on payroll now first which is the most awesome is you
may be funding a 401k and if you're funding a 401k over here on your passive
assets side boom you're paying yourself a salary maybe you're taking a salary of
forty to sixty thousand dollars and you're putting
maybe you're maxing it out and you're putting eighteen thousand dollars into
the 401k and then you're doing a match twenty five percent so if you've got
forty thousand in salary you can even do an extra ten so you're dropping twenty
eight grand into your 401k well why not let your spouse play in the game too
even if your spouse has a day job a different W to and another 401k
can work in that 401k get the match at their day job up to the point they match
and then get out and come join your 401k now let's say there's no 401k over here
at all you could come over here and put your spouse on for maybe twenty one
thousand is typical because then you're gonna have FICA and then your spouse
could do eighteen grand let's say in a 401k boom their w2 is zero you just got
a write-off for 21 grand in your S corp they deferred the entire eighteen into
the 401k and get a zero w2 so tax free and then you can do another 25% match on
the twenty one so there's another five so you're dropping twenty three grand
and from your spouse twenty eight grand in from you
we're over fifty thousand dollars into a 401k and do not think the SEP is a
better way because you're like well mark I need to take more salaries so that I
can put in more money then there's a law of diminishing returns there's a sweet
spot and I want to find just the right spot of payroll
to give you the best benefit on the 401 K and then put your spouse on just
enough to max out their 401 K this is why our tax attorneys our office do a
consult maybe once or twice a very good a year with our clients to help
fine-tune this it can save you thousands now if your attorney or accountants not
talking to you about this you got the wrong advisor please again check out our
law firm below you can always make an appointment for just an hour with one of
our tax attorneys and it doesn't mean we're gonna do your tax return you'd
still keep using your same old CPA even if they're not giving you this advice
but you can already see there's some major planning opportunities here now
let's come to the second reason okay second reason I'm going to use a
different color for this and again I've got what I call color care at March a
color calm in my tax and legal library that it all comes with it at least I
think almost eight hours of training on tax strategies for health care this is
one of them the second reason why I'd put your spouse on payroll is because I
want to fund and H are a that's a health reimbursement arrangement it can allow
you to write up to a write off up to ten thousand dollars in medical expenses on
top of insurance so you're still writing off your health insurance a hundred
percent in your escort it's got to be stated on your W
make sure your accountants doing that right again try not to jam this out on
TurboTax you'll screw it up no offense TurboTax is great you have a
day job and give some money to your church own a home a couple kids great do
turbo all day long all day long but when you own a small business you're talking
strategy get a professional it can save you 20 times whatever you're paying them
if they know what they're doing so you're gonna be deducting your health
insurance in the right place right spot that's a whole video into itself and
then you could have co-pays deductible dental chiropractic massage therapy
over-the-counter under I mean not over-the-counter prescription drugs
hospital visits things that your insurance didn't cover
you're gonna write off in an HRA and it's an extra ten grand but you can't do
an HRA directly out of an escort so what we do
is we set up a separate management company it's a sole proprietorship and
you hire your spouse through this sole proprietorship and even in those in
California or other states where it's expensive to have another entity this
isn't another entity it's not an LLC it's not an S corp it's a sole prop you
hire your spouse here under a qualified HR a document which ours like four
hundred bucks an attorney works with you to design it and then you would backdoor
your spouse into a health reimbursement arrangement of up to ten thousand
dollars in health care expenses it only cost you $400 to do you self administer
it it's awesome there's no insurance company involved no bank and then you're
going to get an extra write off over here so lots of fun there's so much to
talk about here as you can imagine but this is the second reason why you'd put
your spouse on payroll the first reason be in the 401k no
reason to do it over here in the LLC side and again this just opens the door
to maybe some cool planning
in summary folks hopefully this has opened your eyes to another strategy
opportunity a building wealth and better living your American Dream I love this
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