sepira 2023

[klhite]

Can I fund a spouse that help me with my 1099 work?

[DoninGA]

Would you please re-phrase your question.  

What was written does not make much sense - "Can I fund a spouse that help me with my 1099 work?"

[dmertz]

I think you are asking if your sole proprietorship can make a SEP IRA contribution for your spouse.  The answer is No unless you pay your spouse wages that are reported on Form W-2.  If this is instead a qualified joint venture, each of you would have income as sole proprietors and SEP contributions would have to be made for both  based on each spouse's net earnings and using the same base contribution percentage for both.

Note, however, that the deadline for making a SEP contribution for 2023 has now passed, even for those who requested a filing extension.

[Opus 17]

If your spouse materially participates in your self-employment job, you can (and should) officially recognize that.  There are 3 options.

1. Pay her as a W-2 employee of the business.

2. Hire her as a 1099-NEC independent subcontractor, she would file her own schedule C to report her subcontractor income, and you would deduct the subcontractor payment as a business expense.

3. Treat her as a partner or as a qualified joint venture.  This can be complicated, especially if you live in a community property state, or if you form an LLC.  I won't go into details now, but please ask if you need to.

Once your wife has her own earned income, she can contribute to an IRA (if she is an employee) or an SEPIRA (if she is your subcontractor).  There may be other options, but first she must work for the business in some official way that shows up on a tax return.