Will my wife gain Social Security benefits by being part owner with my business if we split income in half and have her part ownership. We live in WA State. Its not a corporation and we have been married for 45 years and I have owned my business for 45 years but I have always filed jointly with one income as mine. I know the tax may be the same but what about Social Security for her?
If you've been filing a SCH C all these years with you as the only owner of the business, then your wife doesn't have anything from the business income applied to *her* social security account. Only you do. Unless of course, you've been paying your wife as a W-2 employee and reporting that on your SCH C. THat would be the simplest thing to do from here on out.
THe other option is to close your sole-proprietorship/single member LLC business and open a new partnership (which requires a new EIN) with both of you as partners. That's a bit more involved though. If you wish to pursue the partnership path (which I don't recommend this late in the game) just let us know and we'll give you the details on what all is involved. (For that though, it would probably be best to seek the services of a CPA or tax attorney in your local jurisdiction - especially if your state taxes your income.)
It really depends on whether your wife materially participates in the business. If she does not participate in the business, then you really shouldn't be splitting your business into 2 schedule Cs just so that she can show income. However, if she does participate in the business, then you should be either splitting the business income, or paying her as a W-2 employee, or paying her as a 1099 subcontractor, so that she accumulates credits in the Social Security system.
Whether you can fix this retroactively would be a subject for a professional tax advisor. Going forward, Carl gave you 2 good suggestions on how to include her in the business. An additional suggestion would be that instead of paying her as a W-2 employee, you could pay her as a 1099 subcontractor. Then she would file a schedule C for her subcontracting income and expenses while you would file a schedule C for your main business, and include her subcontractor payments as one of your expenses.
"married for 45 years" "I have owned my business for 45 years but I have always filed jointly with one income as mine."
Is there a reason this is just now coming up? Does your wife not have enough Social Security credits to retire? If she was born in 1929 or later, she needs to work at least 10 years to become eligible for Social Security
It is quite possible that she doesn't need to collect her Social Security. She may be able to claim 'spousal' benefits, which may be more than her own benefits.
She does have enough Social Security credits to collect any benefits on her own since she did work when she was 16 to 18 years old. Since then she's been a home keeper. My concern was if she should be getting her own Social Security credits or just be under mine. We don't ever plan on separating. Maybe if someone was worried about divorcing, then the spouse that did not work would be left out of Social Security maybe? Thank you all for responding.
As stated above, she needs to work at least 10 years to become eligible for Social Security. Ages 16 to 18 is not 10 years.
And divorced people can collect SS, as follows:
<a rel="nofollow" target="_blank" href="https://www.ssa.gov/planners/retire/divspouse.html">https://www.ssa.gov/planners/retire/divspouse.html</a>
A few years ago we both were getting separate Notices from the Social Security Department every year telling us what our benefits would be if we collected them at that time. I thought she was eligible. Maybe her notice was because she's under my benefits. I always thought you had to have 4 quarters to be eligible not 10 Years!
No, it's 40 (forty) quarters, not 4 quarters. 40 quarters is 10 years.
There's a third option I just thought of too. If you want, change the owner of the business to her from this point forward. You obviously will qualify for social security. So if from here on out if she's listed as the business owner on your joint return, everything gets credited to her account. You already have 180 quarters (45 years) so you're set.
I think you need 40 quarters (10 years) worth of credits to qualify for social security, and then the amount of the benefit is determined by the average of the 30 highest income years (120 quarters).
However, the social security system also has rules for spousal benefits -- a spouse who does not work can collect a benefit based on the work income of their spouse.
For more information and dollar amounts that apply to your situation, you should talk to a financial planner. We can't really give that kind of advice on this board.
For income tax purposes, if she has been a homemaker and has not materially participated in the small business, then she should not have income from the business or SE tax/social security credits. You can't split the income just to be equal, she actually has to work for it. And if she has worked for it, you can't really go back 45 years and fix it -- that would require the assistance of a tax professional to see if anything can be done.
and you really can't do amended returns back beyond 3 years in most cases anyway..
Incidentally, you and your spouse can both sign up for social security online accounts and get your earnings reports whenever you want instead of waiting for the annual mailed statement. It may also be a good idea to sign up for the social security online account and the IRS online account (to request transcripts) for the simple reason that once you sign up, someone else with your stolen identity can't sign up again in your name.
She will be of age 2 years before me, Can just one of you get Social Security at a time or both of you and does that change if she had worked 40 quarters
I think she can take social security at her full retirement age even if it is before your full retirement age, but her benefit may be reduced. Spousal social security benefits is very complicated and you will need to talk to a financial planner.
You mean two of you can collect social security benefits at the same time? Or are we talking about just the medical part at the same time or do you both get monthly payments?
I don't know.
Here are some links
<a rel="nofollow" target="_blank" href="https://www.schwab.com/resource-center/insights/content/yes-there-are-retirement-benefits-for-a-non-working-spouse">https://www.schwab.com/resource-center/insights/content/yes-there-are-retirement-benefits-for-a-non-working-spouse</a>
<a rel="nofollow" target="_blank" href="https://www.ssa.gov/planners/retire/yourspouse.html">https://www.ssa.gov/planners/retire/yourspouse.html</a>
I just skimmed them, but it appears that if you wait until you are both at full retirement age, your spouse gets a benefit equal to 50% of your benefit (so together, you get 150% of your benefit). But if either of you file early, the benefits are reduced (but you get them for longer, so it may still be to your long term advantage).
As I said, this really needs help from a financial planner who specializes in retirement.