“Spouse on Payroll: the Compliance
Trap Hiding in Plain Sight”
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You hire your spouse. You set up a Section 105-HRA. The plan reimburses $20,000 in family medical costs.
Now someone asks: shouldn’t you also put your spouse on payroll and issue a W-2?
It feels like the safe move. But safe for whom—and at what cost? Once you issue W-2 wages, you’ve signed up for quarterly payroll returns, federal tax deposits, Form 940, year-end W-2/W-3 filing, and the ongoing risk of payroll notices. All for a one-employee household.
Adding a $20,000 W-2 in a $100,000-income scenario produces a tax detriment of $195 to $361—with no meaningful federal tax benefit.
Visit to read: Do You Need a W-2 for Spouse-Employee 105-HRA Benefits?