Tax question-Is this fraudulent?

Question

My husband is going to be a 1099 as a salesman. We also have a business in my name. He wants his checks as a 1099 to be made to the business. This way, I'd pay taxes through the business, but get a bigger tax break since it would seem that I'm the only breadwinner of the household. I'd claim him. He'd look like he made no money as a 1099. But isn't the 1099 linked to his name, whether the checks were made to him or our business? Is this a dangerous situation with a posed risk? I'd appreciate some advice. Also, I live in the United States.

Answer 1

Yes, this is fraudulent. You are attempting to assign his income to you. You may be fraudulently underpaying income taxes as well as SS and Medicare taxes by doing this.

A way it could be made nonfraudulent is to have your husband as your employee and you pay him a salary to go out and make that 1099 money as your employee.

You do not "claim" your spouse. If you have joint income and file a joint return, you are taxed the same regardless of which spouse earned the income.

So just have him do a Schedule C on that 1099 money and keep your business separate from his on your joint tax return.

Answer 2

Yes it's fraudulent. But it wouldn't save you anything anyway. The total income would be the same, and it doesn't matter which of you made the money on a joint return. If all the income showed under your name, and you filed as married filing separately instead of joint, you'd pay MORE tax than you would on a joint return. On a joint return you get one exemption for each of you. On a separate return you might be able to take an exemption for him as well as your own, but that would just be a wash, not something extra - and would be shaky, since he does have income for the year. Your itemized deductions on a separate return would be the same if you itemize, or only half as much if you take the standard deduction. And your tax rate would be higher. So there's no point in even considering doing it, even forgetting for the moment whether it was legal. You would NOT get a bigger tax break because it would seem like you were the only breadwinner - you'd end up paying as much tax or more.

Answer 3

If you are married how do you claim him on your taxes? It just doesn't work that way. Whoever has the business would owe the Social Security Taxes but the Federal taxes would be the same whoever owned the business, you, him or together(the rules changed this year regarding business run by husbands and wives). Under ordinary circumstances you would NOT get any tax break by running his earnings through your business. If the 1099 comes in his name he would be required to file a Schedule C for that money regardless of whom the checks were made out to or even if he was paid in cash or barter.

Answer 4

1. Even if the checks are made in the name of business, it won't make any difference if 1099 is in his name. It will be his income.

2. You can even get 1099 in your business's name, then your husband is your employee or partner or independent contractor working for your business.

3. Most important thing is that you won't have any tax advantage by claiming that your husband did not have any income. For this you must learn, about filing status and dependents.

4. You can't claim your spouse as Dependent. Your spouse is never your dependent. But you can file as Married Filing Jointly. Then you get one extra exemption deduction of $3,400 and one extra standard deduction of $5,350. Thus your total deductions (if you don't itemize) will be $17,500.

5. If you are married you can file as Married Filing Jointly or Married Filing Separately. If you have income and your spouse does not have income or has a very little income, then it is better to file as Married Filing Jointly. If both of you have almost equal income, then it won't make much difference. Also may credits and deductions are not available if you file Married Filing Separately. So normally you should file as Married Filing Jointly, unless there is a compelling reason to file otherwise.

5. If your husband gets 1099 and you file jointly return, then you will attach another schedule C for your husband's business income.

Answer 5

The tax frauds here are when it comes to claiming Self-employment taxes and business deductions. Since the payments are going to be made to the business instead of your husband, it will increase the profits of the business and possibly max out part of the self-employment tax. Also, any deductions claimed would be increased for your business.

If the payments were made out to your husband, then 2 separate Schedule C's and SE's would need to be filed.

Answer 6

If the checks are made payable to your company, and you claim all the income and expenses, doing it this way is fine. I just don't understand why you would.

There are no tax breaks as a "single breadwinner" in a marriage. You either file married-jointly, or married-separately there is nothing else.

Reality is that to the IRS for income taxes, it does not matter one way or the other as long as all income is legally claimed and only legal expenses are deducted for tax purposes.

Two ways it will matter though: 1. If he divorces you and states that you are the only income, you could end up paying him spousal support based on "your" income, when in reality it is his income too.

And 2, he may be shooting himself in the foot when it comes to social security. He has to pay his own self-employment taxes to receive the credits he needs for social security or disability.

Answer 7

The 1099 will have to be made out to your husband, not you. You should do a separate Sched C for husband, because he needs the credit for the soc sec taxes in his name

Answer 8

There are two words that describe this idea and the first is bull. Have a tax professional go over your situation and make recommendations about the best way to run your businesses.

Answer 9

Assuming that you'll be filing a joint return with your husband (you can NOT file as Head of Household), it won't make a dime's difference in your utimate tax bill, except the Self-Employment taxes.

However, if you're both self-employed you could have trouble with your Social Security benefits down the road if you don't properly credit the SE income to each of you as it should be since your eligibility for SS and Medicare is tied to your lifetime creditable earnings and how long you worked. If you pull a slickie now to save a few tax $$$ you'll be in the Alpo for Lunch Bunch in your "Golden Years."

Answer 10

When you try to trick the system, that's how you wind up owing money BIG time. There's audits, posisble jail time.
The government will see all of these personal deposits and your hubby will have to prove where the money came from. If they see your income, and notice your expenses and savings is more than that, it's pretty difficult to explain, don't you think?
I'd get these shady thoughts out of your head asap unless you like girls like Chris who you have to do unmentionable things with in order for protection, and your hubby likes Bubba making him squeal like a pig.