Wife owns an LLC and spouse draws a salary from LLC how do we file?

[thdcny]

Wife owns an LLC and spouse draws a salary from LLC how do we file?

Jointly or Separate?

[AmandaR1]

If you're asking if you should file Married filing joint or married filing separate; it's nearly always advantageous to file jointly. This doesn't change because you have a business. Also, there are numerous considerations besides taxes, for legality and other aspects, which I can't advise on. 

When it comes to how to file taxes for a LLC, it depends on how many "members" (owners) were listed on the LLC paperwork with the state the business is formed in. It sounds like only one spouse is the owner; so it in this case, the single owner LLC defaults to being self-employed. This is easiest option and allows the owner to report the business on the personal return, with schedule C (attached to form 1040). 

 The spouse payed as an employee; the business should treat as an employee and issue a W-2 for. Then, the W-2 will also be reported as a deduction for the business (on schedule C attached to the personal return) and income on your personal return (by entering the W-2). The business will need an EIN for paying payroll taxes. These taxes are done separately from income taxes. 

This means you can file your income taxes using TurboTax Home and Business. If you're both members of the business, it doesn't matter that one spouse takes a draw; that's disreguarded for tax purposes and the business net income is taxed. For more on this situation, see my explanation here: https://ttlc.intuit.com/replies/6081641

Let me know if you have any follow up questions. 

[jenny59]

Is this true in Florida as well?

I read this pertaining to paying a spouse from husbands single member, LLC:

1. Sole proprietor, the LLC is treated as a sole proprietor. The single member/owner is not an employee and his or her wages would not be taxable wages in Florida. If the LLC filing its federal income tax return as a sole proprietor has other employees, the LLC itself must register and pay tax on the wages paid to the other employees, unless the wages are exempt for another reason.

   Wages are exempt if paid to an individual employed by his or her son, daughter, or spouse, including step relationships. In addition, wages paid to a child, or stepchild, under the age of 21 employed by his or her father, mother, stepfather, or stepmother are also exempt. As provided in s. 443.036(20)(d), F.S., a single member LLC is the employer required to register and report employee wages and pay the tax even if it is a disregarded entity for federal income tax purposes.

Reference: Section 443.036(20), Florida Statutes

[Hal_Al]

@jenny59, that's for the purposes of the FL payroll tax and does not affect federal income tax reporting.  It's the same in every state.

[Hammercr]

I realize this is an old thread.  If the wife owns the LLC, the spouse is an employee, but earnings are deferred in solo 401k plan for the spouse, do you still have to file a w2 and payroll or only if wages are not deferred?  What about for other tax exempt options such as 105 HRA?  

[AmyC]

Yes. A w2 must be issued showing the  income and the deferment with the proper codes and amounts. The 105-HRA is paid by the employer for the employee and the portion belonging to the employee must be added into wages.

Wages would look like this:

1. Reimbursement for family health premiums:

  $7,000

2. Reimbursements for uninsured medical expenses:

  $5,000

3. W-2 Cash Wages:

  $2,000

Total of $14,000 in wages

See:

• About Form W-2, Wage and Tax Statement
• Health Reimbursement Arrangements (HRAs)
• Solo 401K

@Hammercr