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