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Employee wages you pay your spouse are fully taxable. Your spouse-employee must pay federal and state income tax on wages. And you and your spouse must each pay half of the Social Security and Medicare tax on wages. As your spouse's employer, you must withhold these taxes and pay them to the IRS.
Hiring Your Spouse Can Maximize Retirement Benefits One of the biggest benefits to placing your spouse on the payroll is the ability to maximize your retirement benefits. In 2022, the IRS allows employees to contribute up to $20,500 per year into their 401(k) plans.
Thus, it is very clear that if the husband makes payment of commission or salary, etc. to his wife from his proprietary concern or a partnership firm or a corporate entity, then such payment of either a salary or commission paid to the wife would not be treated as the income of the wife because the same would be ...
If you decide to put your spouse on the payroll as an employee, you must treat them as an employee in every way: Give your spouse a title and an appropriate salary for that title. Have your spouse complete all the required new hire forms and payroll authorizations, the same as any other new employee.
A spouse is considered an employee if there is an employer/employee type of relationship, for example, the first spouse substantially controls the business in terms of management decisions and the second spouse is under the direction and control of the first spouse.