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Tax Planning/Paying an assistant


QUESTION: My husband is a licensed Realtor, working as an independent contractor.  We live in CA.  I have been doing most of his admin/clerical work (as much as I can without a license of my own) for the last year.  I am not otherwise employed.  For 2015 we plan to start paying me as a subcontractor for the admin work.  Also, within the next 2-3 years, we plan to purchase a new home.  My husband had a horrendous identity theft issue three years ago and had to file bankruptcy.  Needless to say, we would be relying on my credit/income alone to purchase a new home.  My credit is excellent, but we need my income to be high enough to qualify.  My question is, can my husband pay me, as his assistant, most (if not all) of his gross income, minus other business expenses, so that all of our family's net income appears in my name on our return, rather than his?  I would, of course, pay income tax on what I am payed.  In other words, is there a "cap" on what he could reasonably write-off as payment to his subcontractor/assistant?  We file married/jointly.  Thanks!

ANSWER: There shouldn't be an issue on what is paid to an assistant, but when you file jointly, there is no difference when it comes to the income since it is all grouped together.  If you are trying to show all the income, you may be better off being paid as an employee, but you probably don't want to overpay yourself for tax purposes.  However, you indicated that wasn't an issue.

---------- FOLLOW-UP ----------

QUESTION: Thank you for such a swift response.  Could you explain why it may be better to pay me as an employee rather than a subcontractor?  Also, wouldn't having an employee bring along additional expenses...such as work comp?

Regarding worker's comp, family members are excluded (you wouldn't sue yourself or your spouse for an injury on the job).  

Being paid as an employee allows for several added benefits: (1) state disability in CA; (2) unemployment coverage; (3) ability to set up a Health Reimbursement Arrangement whereby your medical expenses could be written off as a business deduction.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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Enrolled Agent, Admitted to Practice Before the IRS, Accredited Tax Preparer, Fellow of National Tax Practice Institute, Certified QuickBooks ProAdvisor (1999-2011), Sleeter Group Certified QuickBooks Consultant, Life & Disability Insurance Agent License (California, Texas, Maine), Real Estate Agent License (California); Many years of continuing education in all these fields.

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