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Question about deducting training costs

I run a small S-Corp. My wife helps me with a lot of stuff with the business, but I don't pay her a salary or 1099 or anything. She has a full time job but helps me out after hours a little each week. We have never bothered to have me pay her because it would be like the right hand paying the left: it all ends up in the same account.

Now, in order to expand the business and chase some additional work, we are both taking spanish lessons.

Can I deduct the cost of her portion of the lesson fees?

If she on the books as a contract part time employee (1099) would it make any difference in this matter?

Reply to
cmay
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"cmay" wrote

Even though she's not a paid employee (yet), be sure you can document her work for the business. Then I feel the IRS would allow the deduction for that tranining expense.

Considerations to making her an employee should be made with this new year. While it's just exchanging money from one pocket to another as you see it, the ramifications run deeper than that.

Yeah, don't do that. Just make her an employee, either this year (2008) or next (2009). Even just a few dollars, but more than the business pays in benefits, provide many benefits at no (or very little) tax costs. If you're already doing payroll, to yourself and/or other employees, then one more check isn't as big deal. Additional net tax costs should only be FUTA and SUTA.

Reply to
Paul Thomas, CPA

Not quite. She'll earn social security credits which could be handy in the future. If your S corp is making more than the social security cap (102k for this year) then it also might matter. Say your salary is 250k, but only 102k of it is subject to social security. If you pay your wife 50k, then in essence 152k of your income is subject to social security.

Reply to
removeps-groups

You should also consider whether the Lifetime Learning Credit or Tuition and Fees deduction (for either or both of you) would be a better benefit, without involving the S-corp at all. These benefits depend in part on attending an eligible institution for the purpose of *acquiring* or improving job skills. See Pub 970 for more information.

-Mark Bole

Reply to
Mark Bole

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