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Spouse issuing 1099 to spouse
I work as a subcontractor for 4 months this year where I will receive a 1099 form. My husband in turn worked for me to help me out in special circumstances can I issue a 1099 form to him to cover this work. Will the amount I pay to my husband be deducted from my personal income on our joint return. What additional forms would we need to file if any?
Thank you Peggy |
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If in fact you actually paid your husband then yes, you can issue a 1099 to him. You would deduct this as a business expense on Schedule C. You would need to provide a copies of the 1099-MISC to the IRS and your state tax office, and also file form 1096. But given that you file jointly - what's the point of creating all this paperwork?
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To phrase it a different way, you can deduct your husband's 1099 but he has to pay taxes on it, including SE straight off the top.
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What both Joypulv and ebaines are driving at is that generating the 1099 will cause your husband to have to file his OWN Schedule C and pay BOTH income AND self-employment tax on the money you paid him.
While you will generate a legitimate expense that will lower your income, your husband will then have to pay the mentioned taxes on the payment you gave him. It is a massive paperwork drill without virtually NO tax benefits, UNLESS the money is used by your husband to fund a retirement plan or IRA. |
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The problem is not paying taxes on earned income the problem is that I did pay him an income but was not going to use a 1099 however, business has been better this year and I will exceed the earnings limit for my social security the $14000+ if I don't issue a 1099 to my husband to lower my income. I figured it would be a lot of paperwork, but I feel the need is there due to SS cap.
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I see - just to be clear, this cap is because you are receiving SS prior to full retirement age, correct? Keep in mind that if you do lose some SS income this year the cap goes away when you reach full retirement age, and your payout then will be bigger than it would have been otherwise. So even if you are docked 50% of SS payouts this year you may well get it back later in increased payouts.
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Yes I realize this however unfortunately I can't afford to go without a payment for 2 or 3 months, the crash in 2000 deleted our retirement accounts drastically and we need this additional income. This is a one shot deal as my husband now works for the same company and we will receive a W2 for this year beginning with May income. I feel that paying the taxes will be cheaper than losing 2-3 months of SS benefits at this time.
Peggy |
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