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To keep my consulting business unknown to my employer, I had checks sent to my wife.
A 1099 will be issued to my wife, and I have every intention of paying taxes on this income. I didn't see the need for a tax consultant, since we file jointly. The problem, which my tax preparer just pointed out to me, is that since my wife has no other income, the 1099 income will be subject to full self employment (social security & Medicare) tax, in addition to income tax. If I had the checks directed to me the income would only be subject to the 2%+ Medicare Tax(in addition to income taxes), which has no limits. This represents about an extra 15% tax on income that she had nothing to do with generating. We have expenses to deduct, but the tax will be a BIG number on our 2011 Tax Returns, and I would like to fix this somehow. Does anyone have any suggestions, assuming I can't go back to my clients for 1099's made out to me? Please advise.
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