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Can you take off an exclusion as a business expense?

user0607121985
Level 2

One of my clients who is a real estate agent said that she sat in a session of a Tax attorney who said (if she understood it correctly), that you could take an exclusion for working a family member in your business and take it off as a deduction.  Is this true?

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rbynaker
Level 11

Huh?  What's an "exclusion"?

When you pay your working family member wages, you report those wages on form W-2.  The wages and associated employer payroll taxes are deductible on Schedule C.  The wages are included on that family member's 1040.  So if it's a spouse, you're moving it from Schedule C to 1040 Line 1.

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rbynaker
Level 11

Huh?  What's an "exclusion"?

When you pay your working family member wages, you report those wages on form W-2.  The wages and associated employer payroll taxes are deductible on Schedule C.  The wages are included on that family member's 1040.  So if it's a spouse, you're moving it from Schedule C to 1040 Line 1.

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abctax55
Level 15

Either your client "mis-heard" what the attorney was saying, or they should find a different attorney.

Or, let HIM do the tax return :smile:

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


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ehill
Level 4

Maybe the attorney was talking about like Fica/Medicare/Futa for the "exclusion", not the word I would have used.  But that would make sense for a child or spouse employee.

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IRonMaN
Level 15

When is the next class?  I'm eager to learn about things I never heard of before.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
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