Response to readers
E-mail questions:

Q: Is a spousal employee exempt from:
1. SUI (state unemployment insurance),
2. FUI (federal unemployment insurance,
3. Workers Comp. Insurance,
4. State Disability Insurance?

RG> A spousal employee in a sole proprietorship is exempt from all four of the above.
However, in an S- or C-corporation environment, the employee is subject to all four.

Regarding S-Corporations:

Q: Does the SEC work as well for S-Corporations?
Q: What about the 2% rule of ownership?
Q: What if my spouse is a shareholder?
Q: I have read that a lot of the fringe benefits allowed for
    C-Corporations aren't allowed for S-Corporations.

RG> Most of the deductions are equally useful in an S-corporation, except for one important major point: Medical Insurance and the uninsured medical expenses may not be properly deducted by the owner of more than 2% of the stock, including either spouse.
      This medical deduction issue applies only to S-corps, not to sole proprietorships, and not to C-corps.
      I recommend that you read my article, on the www.RobertGreeneCPA.com website, entitled
A Question of Tax Structure: The Single Most Important Decision In the Formation & Operation of Your Business.

      However, in my opinion, there are still plenty of lucrative tax-free employee benefits to justify implementing the Spouse Employment Contract, within the S-corporation environment.

      Actually, the name is misleading in this case, because hiring the spouse is not even necessary. The owner of the S-corp can be the only employee, whether they are married or not. As an employee of the S-corp, they are eligible for all tax-free employee benefits (except medical.)

Q: Why is the SEC for S-corporations much more expensive than for sole proprietorships?

RG> The price on S- and C-corporation contracts has recently been lowered from $697 to $495. I believe that this is a fair price, and it includes 1/2 hour telephone consultation, Quick-Start instructions, examples and helpful hints, attachments and appendices, and a money back guarantee. The contract package is extensive (66 pages) and practical. Each section is documented and specifically referenced to Internal Revenue Code sections and paragraphs. This formal contractual relationship is necessary to defend against the possibility of the IRS disallowing substantial tax deductions, and imposing interest charges and penalties for underpayment of tax. While a written contract is not specifically necessary to merely hire unrelated employees, it is necessary for an owner, their spouse, or an unrelated employee to receive these tax-free benefits. There must be a written "plan", according to the tax code.
      Beyond that, it educates the business owner on how to specifically utilize all the tax free employee benefit deductions available within the law.
      Buying this package is actually the most efficient way to get tax advice, compared to paying $150 per hour for individual personal lectures in which you would have to scribble notes. Almost everything is done for you. No other tax professional has done this extensive technical and time-consuming tax research and documentation, in this specific area of taxation.
      For the time and money you invest in this area, you will be compensated handsomely, in the years to come.

Thank you for your intelligent questions.
I hope I have answered these questions for you. If not, please let me know.

I wish you success in your business, and the ability to keep, for yourself and your family, most of what you earn! :)

"My husband has a sole proprietorship..."

Good. I'm glad you visited HireYourSpouse.Com. Here you will find information about the most powerful tax reduction strategy I know of.

"We have been wavering about this SEC concept since I first reviewed your website".

In the time that has passed while you have been wavering, you have lost much more money through unnecessary Federal, state, and social security taxes than you would have spent to implement the SEC.

You should review the website again. More magazine articles, Frequently Asked Questions, Money Back Guarantee, IRS Agent's Review, Tax Second Opinion, and other information has been added. Then, if you still do not understand how the tax deductions work, call Robert Greene.

"We have always done our own taxes because we feel that we are the best qualified people for the job."  

You may be most familiar with the details of your own life. You may save some money in annual professional fees, but you are definitely paying more in taxes than you need to. You prepare one tax return yearly. In fifteen (15) years, Robert Greene, CPA has done thousands.

Of course, you can do your own dental, legal, plumbing, electrical, automotive and TV repair work, too! But why don't you? Maybe the risks outweigh the benefits? ... Technical considerations?

"I have been doing some research on my own-I called the IRS and received their publications"...

  • Do you actually understand all of what you read, in the technical sense?
  • Did you go beyond the IRS publications?
  • Did you read any parts of the Internal Revenue Code?
  • Did you read any Private Letter Rulings?
  • Did you use any CD-roms?
  • Did you read any Coordinated Issue Papers, published by the IRS?
Don't feel bad if you answered NO to all 6 of the preceding questions. Most tax preparers and accountants would have answered exactly the same, and still feel qualified to give their "professional opinion" on this subject!

Anyway, the IRS's job is to collect taxes. It is not the IRS's job to teach you strategies and techniques to reduce your taxes! Duh!

"To my knowledge, there is no way for us to legally deduct more than $5,000 worth of daycare expenses".

What is so bad about that?

With a Federal tax rate of 28%, state tax rate of 6%, social security tax rate of 15%, totaling at 49%, you would save $2,450 every year, according to your calculations. But, according to the IRS, only if you are a "bona fide employee". Do you know how to establish and document that? Did your research reveal that you need a Dependent Care Assistance Plan under IRC Section 129?

Daycare is only 1 of the 16 categories of tax deductions contained in the SEC. Did your research reveal the other 15 categories?

"I, as an employee, would have to report anything over $5,000 of daycare as income, which would negate any tax savings from the business deduction."

As shown above, according to your calculations, you would save at least $2,450 annually, from only 1 of the 16 categories of tax deductions in the SEC. Simply do not give benefits in excess of $5,000 in this category, and you will not need to report any of it as income.

"Also, the IRS is very explicit that benefits are of "little value", ie tickets to a sporting event occasional lunches , a phone call or two..."

This is a very limited and incomplete view of only one of the 16 categories of tax-free employee fringe benefits available to employees. When it is used properly, and with other elements of the contract, it can produce impressive tax savings.

"So I find it hard to believe that we will be able to deduct between $10,000 and $20,000 just because we set up this contract and not have to report these fringe benefits as income."

Your "research" may not be complete, or your misunderstanding may be misleading you. Anyway, who is paying your expensive taxes?

Did you identify all 16 possible areas of non-taxable fringe benefits that can be deducted by the business and not be reported as income to the employee? Just because you cannot understand all of the pieces to the puzzle does not mean it cannot be done. Do you actually understand all of the mechanisms of the car you drive, or the TV/cable/satellite system you watch?

The provisions of the SEC are strictly in accordance with the Internal Revenue Code, private letter rulings, Coordinated Issue Papers, etc. Certain aspects may seem illogical at first, but this is the law we are all obligated to observe.

Please carefully review:

  1. the published magazine articles
  2. the Money Back Guarantee
  3. the Review of a Senior IRS Official
  4. the description by Robert Greene in the Summary
If you still feel the need to personally review, before you buy, the Spouse Employment Contract developed by Robert Greene, CPA, CMA, you are welcome to do so, in any of my 3 offices.

You can schedule an appointment for a 1 hour consultation on the order form.

http://www.hireyourspouse.com
cpa1@hireyourspouse.com
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