Should You Pay A Spouse A Salary?
When deciding if you should pay a spouse a salary, the main factor to consider is whether the individual providing services is truly an employee or an independent contractor. In general, employees receive a salary and are subject to taxes; independent contractors are paid at an agreed-upon rate for each job completed and generally do not have taxes withheld.
If the salary you are paying a spouse is part of an accounting practice, it’s important to consider your bookkeeper’s advice and ensure that salary payments are reported accurately. It may also be beneficial to consult with an accountant or financial advisor to understand more about taxation laws and regulations that may apply in this situation.
Why make your spouse an employee?
There are several potential benefits to having a salary arrangement with your spouse. These may include helping boost household income, taking advantage of salary tax deductions, and streamlining payroll processes. Additionally, salary payments can provide greater financial security and stability by ensuring that the recipient has steady monthly earnings.
Keep records of payment
Keeping track of salary payments to your spouse is essential for any accounting practice. It’s important to keep accurate records in order to ensure compliance with relevant tax law and to have a clear record of salary payments made over time.
A bookkeeper or accountant can help you accurately record salary payments, as well as provide advice on how to properly report salary payments to the relevant taxing authority.
Pay a reasonable wage
Finally, it is important to ensure that the salary you are paying your spouse is reasonable and appropriate for the services they are providing. Speak with your bookkeeper or accountant to determine a salary rate that is in line with industry standards and take into consideration any skills or expertise the recipient may have.
By following these tips, you can ensure salary payments to your spouse are done in a compliant and efficient manner. By taking advantage of salary tax deductions and streamlining payroll processes, salary payments can support household income while providing greater financial security and stability for both parties involved.
If you’re thinking about hiring a bookkeeper for your small business, contact us at BBS Accounting CPA today. We would be happy to discuss your specific needs and how we can help you take your business to the next level.