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I hope this issue of the Tax Reduction Letter finds you and your family in good health. Warmest good wishes at this difficult time from all of us at the Bradford Tax Institute.
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In Part #1 of our article titled Husband-Wife Partnerships-The Tax Angles, we explained how basic tax angles affect unincorporated businesses. Specifically, spouse businesses that are classified as partnerships for federal tax purposes.
In Part #2, (the current issue), we’ll explain how the mishandling of your profitable unincorporated husband-wife business can cost you plenty! You see, if your business is classified as a partnership for federal tax purposes, you could have to pay shockingly high Social Security and Medicare taxes.
But hang on. There’s some good news. We’ll show you three strategies you can use to save a lot on your self-employment tax bill. Plenty of money-saving tactics are waiting for you when you read my new article titled, Tax Tips: Husband-Wife Partnerships: Three Tax-Saving Strategies—Part 2.
Check out these proven, legal strategies you can use now.
Strategy #1: Use IRS-approved rules to minimize the big self-employment tax hit.This applies to husband-wife businesses in community property states. You see, in a community property state, you and your spouse can choose to treat your unincorporated husband-wife business as a sole-proprietorship operated by one spouse for federal tax purposes. Sole-proprietorship status can save you a ton of money as we’ll explain when you read the full article.
Strategy #2: Convert your husband-wife partnership to an S corporation, then pay yourself modest salaries as shareholder-employees. When you do, you’ll be able to pay out most or all of the remaining corporate cash flow as FICA tax-free cash distributions! We’ll show you how to come out a winner when you read the full article.
Strategy #3: Dissolve your husband-wife partnership and hire your spouse as an employee. If you’re not running your business in a community property state, and you aren’t a fan of the S corporation solution, there are five steps you can take to dramatically reduce your self-employment tax bill. We’ll tell you what the steps are when you read the full article.