More on Spousal Employees

June --

I've been working from home for about six years and the momentum finally hit and now I have contractors of my own.

I was reading the pre-release of The Freelancing Mom and read your interview and when I read the part where I could hire my husband and give him insurance I jumped for joy. Between being over 230lbs. (albeit terribly healthy) and pregnant...health insurance is not an option for me - or so I found after calling company upon company. But if I could give it to my husband and he insured his spouse + kids, viola!

The only problem is...I know how to work with contractors and have a bookkeeper/tax professional that takes care of the 1099s and the taxes. But...how do I hire someone? Can I do it as just me or do I have to incorporate or set up a DBA first? Is this answered in your book that I'm about to order after I hit send? Once I order the book will I have access to the Most Simple System forms?

Thank you so much, I'm terribly glad to have found you :)

Lisa
Plainfield, NJ


Dear Lisa,

A sole proprietor -- which you are -- may hire employees. You do not need to incorporate.

As long as your husband really works for you -- that is, you are not paying him $400 a week to take out the trash -- then you need to setup a payroll and pay him. There are initial federal and state filings and then quarterly filings that must be done. I suggest you talk with your tax pro who can set up a payroll for you or check out payroll services such as Paychex or ask your bank if it provides a payroll service.

If I understand you correctly, then you said that you cannot get health insurance. Your eligibility for insurance coverage is in not way influenced by your husband being on your payroll and his having health insurance.

If you, the employer, provide a medical plan for your spousal employee then all your employee's family health costs are reimbursed to him by your business. That makes your family health costs -- items such as medical insurance, doctors, hospital, dental, eyeglasses, RX, etc. -- a business deduction for your business.

The medical plan must meet certain IRS requirements. To set up this plan -- it's IRS Code Section 105 -- I suggest you check out BizPlan online. Then call John Gill -- (309) 826-9610 -- at BizPlan to get even more info.

You may also provide your spousal employee with dental coverage, life insurance and a pension.
The advantages of having a spousal employed are too broad to go into in a post. Your personal tax professional should be able to provide you with all the particulars. If not, then find a new pro.

Best,
June