By Mikal Gilmore and Mawna McGrory, Hire My Team
(ALEXANDRIA, Va.) — My husband, who is a U.S. citizen, is having trouble finding a job to take advantage of the new federal tax law. So, we decided to go into business ourselves.
He started out as a tax preparer in a very small city in Kentucky, but he ran out of clients pretty quickly.
He quit after a year, broke even and wasn’t taking in any additional income, so we took the risk and made our first few thousand dollars in sales last year.
So far, we’re doing OK. We’re able to send him to work every night and pay his taxes. We pay him minimum wage, maybe slightly above minimum wage, but usually between $7.50 and $8.
Unlike workers in the hospitality industry, we’re paying him well below the minimum wage, and we pay him twice as much as he would earn as a tax preparer.
We’re not getting any commissions because we’re paying him and he’s probably making about $2 an hour less than an actual tax preparer who can give advice and list deductions.
Where’s the Income Tax Fraud?
In addition to our limited income, we’ve also got to deal with a higher tax rate and an employer withholds about 35 percent from my husband’s salary to help with his taxes. We’ve only gotten about half that or less from our clients so far.
While I’ve worked on the business, my husband has had to earn an income to qualify for Social Security and Medicare, which add up to a big chunk of our combined income.
If I worked full time at my full-time job, I’d get more than a half of a paycheck in Social Security and Medicare tax, but I don’t.
So, he makes far less money to keep me from getting laid off if we lose too many clients and his income has to keep up so we can keep paying our taxes.
I Feel Like a Creditor, Not an Employer
Our credit rating is a black mark on our credit report, which has to be on our credit report for at least seven years. We don’t have any credit cards, but I’ve been paying off my credit card bill because of it.
If I fail to make minimum payments for two or three months in a row, the bank can report our delinquency to the credit bureau. We’ve still got about 30 percent of our combined credit on our credit report.
While I’m still getting paid by my husband, I don’t feel like I have much control of my future finances.
It’s difficult to plan and budget now that we have to worry about a high-priced tax attorney or a credit bureau and wonder if my salary won’t make up for what we have to pay into Social Security and Medicare.
On top of that, my husband and I have to pay taxes on our business income and one-third of our net income.
Don’t Do This to Your Family!
I felt like a thief when I realized that I couldn’t fully enjoy our new life and make money doing what I love, despite working hard.
I’m thinking that it’s the government’s fault that we have to pay more taxes, even if our lifestyles aren’t being compromised. But it’s not entirely their fault.
If I could have stopped paying into Social Security and Medicare when my husband got laid off, I wouldn’t have to worry about paying taxes. At least I could retire now and give my husband a chance to have more than a minimal retirement plan.
Penny-pinching? Figure Out How to Cut Your Taxes
Think about it. I want to retire with a few thousand dollars of savings. But I cannot.
Under the new tax law, I might have to pay up to 10 percent more in taxes than what I paid last year. And if I increase my life insurance coverage after getting laid off, I’ll have to pay tax on the premiums I pay for that.
If I don’t change my behavior, I’ll eventually owe taxes on everything that we