PE CPA›
PRISCELLA'S PICK Four Things to Know About Employing Your Spouse Sole Proprietor, Single-Member LLC, Partnership (as long as your spouse is not a partner) Pay benefits, not wages: Pay your spouse with tax-free employee benefits such as health insurance which is deductible as a business expense but not taxable for your spouse. Establish a medical reimbursement arrangement: The most valuable fringe benefit is reimbursement for health insurance and uninsured medical expenses. This is done through a 105-HRA plan if your spouse is your sole employee, or an Individual Coverage Health Reimbursement Arrangement (ICHRA) if you have multiple employees: Provide benefits in addition to health coverage. Tax-free fringe benefits include education related to the business, up to $50,000 life insurance, or inexpensive gifts. Treat your spouse as a bona fide employee. Proof of employment: - You are the sole owner of your business. - Your spouse does real work under your direction and keep keeps record of their work hours. - You regularly pay your spouse's medical and reimburse expenses from your business checking account. - Your spouse's compensation is reasonable for the work performed.
