Splitting Schedule C's for SS benefits

Any non-Tax accounting topics go here.
#1
onehand  
Posts:
14
Joined:
22-Jan-2023 2:48pm
Location:
Texas
I have a client who has been married for 30+ years and they worked as self-employed realtors for many of those years. Instead of splitting the income between 2 schedule C's so they would share the SS benefits, they were all in his wife's name. Now they are retirement age and she is receiving the social security payments. It wouldn't be so bad except she is also a retired teacher, so her SS benefits are being discounted because she's receiving teacher's retirement benefits.
So they are going to start splitting up their Schedule C this year, but they were wondering if they could go back and amend their previous tax returns to change their SS benefits. If so, how far back could they do this?
Anybody have an experience with this or opinions about this?

Thanks, Ky
 

#2
HowardS  
Posts:
2801
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
Instead of splitting the income between 2 schedule C's so they would share the SS benefits, they were all in his wife's name

Wrong, wrong, wrong. Assignment of income doctrine.
Retired, no salvage value.
 

#3
Posts:
6006
Joined:
22-Apr-2014 3:06pm
Location:
WA State
onehand wrote:Instead of splitting the income between 2 schedule C's so they would share the SS benefits, they were all in his wife's name.


It stands to reason that they did this because her income put her over the FICA limit and they saved SE tax. If that is the case, they are now collecting the benefits for which they paid.
Even if they didn't do that, there isn't anything to move the needle on this now to my knowledge.
~Captcook
 

#4
onehand  
Posts:
14
Joined:
22-Jan-2023 2:48pm
Location:
Texas
They weren't over any FICA limit. They were only making $30,000 to $40,000
 

#5
HowardS  
Posts:
2801
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
Retired, no salvage value.
 

#6
Joan TB  
Posts:
1896
Joined:
21-Apr-2014 9:08am
Location:
Texas
I am betting that the Sch C were put all in the wife's name because as a teacher in Texas, she likely wasn't contributing to SS at all and they thought this way, she would get both. However, sounds like they didn't know about the reduction in SS benefit when receiving the state (Teacher Retirement System) retirement. Oops!!

As to amending those returns now, HowardS seems to provide the link you need. But I do wonder what REASON you would give to explain why this income now suddenly all belongs to the husband. If the husband has previously started receiving this SS benefits, make sure to answer both questions --
A) that it would be allowed to ADD this SE income to his record, and
B) in addition to TAKING IT AWAY from her record.
 

#7
onehand  
Posts:
14
Joined:
22-Jan-2023 2:48pm
Location:
Texas
He wouldn't be taking all the income, only half.
 

#8
onehand  
Posts:
14
Joined:
22-Jan-2023 2:48pm
Location:
Texas
HowardS - thank you for that link. Very helpful. I wonder if they might accept the correction under this provision:
"(4) Entries for wrong person or period. We may correct errors in SSA records resulting from earnings being entered for the wrong person or period."
The wrong person being the spouse.
I don't know if this makes a difference, but this is in a community property state.
 

#9
HowardS  
Posts:
2801
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
Might be worth a call to SS.
Retired, no salvage value.
 


Return to General Accounting



Who is online

Users browsing this forum: No registered users and 5 guests