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» From: Somewhere Out There Dear TaxMama: My husband is self-employed and he hasn't had any deductions taken out of his checks since the time he started his business. He claims that after he writes off his business expenses, he'll get more than he owes. On top of that, he is telling me to claim exempt with my employer becauese his expenses are going to be much larger. I don't completely like that idea. Is this safe to do? Or is it still better for me to pay my federal witholding? Irina Dear Irina, I never like to come between a husband and wife. But let me tell you my experience with people who start their own businesses, OK? They don't have a clue about what expenses are really deductible and what must be capitalized (treated as inventory or as assets and written off over several years). All they know is, at the end of the month, they have no money left. Too often, I've had people come to me, proud that they have a loss and won't owe any taxes. Only to be shocked, after I've gone over their books and pulled out the fixtures, leasehold improvements, inventory, etc. and it turns out they have a $100,000 profit. (Unclear on the concept? business are supposed to have profit ... sheesh) So, if I were you, I'd just take some precautions. I would just keep on taking some reasonable withholding out of my paycheck until I saw the final numbers at the end of the year. Then, if he's right, well ... look, guys like to be right. So, he'll get to strut around and say, "I told you so" a lot. ;~) But, you'll have a nice, healthy bundle of money to pay the debts he's incurred in order to be right. Let me tell you a little secret: If he IS correct, if he WILL have all those deductions to reduce your taxes ---- and it means he's LOSING money! It means, he's working hard, but wasting his time. (Unless it's a business that takes a year or two to ramp up towards being really profitable ...) So, find a subtle way to help him become profitable. Best wishes, Eva Rosenberg Your TaxMama  |
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