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Thinking of Hiring Your Spouse?
Scott F. Usher, MST, CPA
Senior Manager, Tax Practice
May 17, 2010
If you've considered hiring--or rehiring--your spouse to work in your family business but couldn't quite make the numbers work, important federal tax benefits in this year's HIRE Act may tip the balance.
Major provisions of the Act include a payroll tax holiday for an employer that hires a displaced worker and a retained worker credit if the employer continues that employment for at least 52 weeks.
Among the HIRE Act's criteria for a qualified new hire, is the following: The person hired cannot be related to anyone who owns more than 50 percent of the employer business "in a way that would disqualify the individual for the work opportunity tax credit." These disqualifying relationships include dependents, children and their descendants, siblings and step-siblings, parents, a parent's ancestor, step-parents, nephews and nieces, uncles and aunts, and in-laws.
Although it may not have been Congress' original intent in creating the new tax benefits, the current list of disqualifying relationships does not include a spouse.
Of course, this doesn't guarantee that every spouse is eligible, even assuming he or she satisfies all of the other requirements for a qualified hire. A spouse may be disqualified on the basis of another family relationship--if the spouse's parent or in-law is a more-than-50 percent-owner of the business, for example.
However, as long as your spouse satisfies all of the requirements for a qualified hire, he or she will not be disqualified simply on the basis of your spousal relationship. You can hire your spouse and qualify for both federal tax benefits.
For an overview of the major provisions of the HIRE Act--and more about the criteria for a qualified new hire--click here.
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