Is it possible to create the Mr&MrsX Corporation, and have both Mr and Mrs X have their respective employers make out their paychecks to the corporation instead of the individual. Obviously Mr&MrsX Corporation has to serve some legitimate function as a business of some sort; I’ll leave that detail out.
As a result MrX and MrsX have zero personal income; the corporation has their “salaries” as cash-in. Subtract corporate expenses, and get taxed as a corporation on that amount.
That’s a hard question. I don’t have the time to answer any hard questions today. But I do have time to answer an easy question. So if someone copied your entire post, except what I’ve quoted above, and replaced it with:
I would respond:
Because it would be pointless. Either the corporation accumulates money, doing Mr. and Mrs. X no good at all, or it distributes that money in some fashion to Mr. and Mrs. X. If the latter, it’s income, and Mr. and Mrs. X pay taxes on what’s distributed. Double taxation! Ooops.
(For those playing at home: Of course, an S election would avoid the double tax. I trust that anyone who knows what an S election is doesn’t need an explanation of the other reasons that this wouldn’t work.)
There was a time where this could be done. At this point it just serves to raise your taxes. It would be a Personal Service Corporation (See Section 269A of the Internal Revenue Code).
No problem. The idea was cutting edge a few decades ago. The Congressional “fix” is pretty harsh so it almost never comes up anymore.
The S-Corp comment above is real. Using one in some circumstances can reduce payroll taxes (FICA etc.). In the last election, I believe it was a minor point of attack against John Edwards. He used it to reduce is medicare tax. Its a legal move but only useful in a handful of circumstances.
This could work if you were both Self-employed consultants, however. But you’d have to get a Tax pro to help you with it.
Of course, everyone here has to understand there really isn’t a “marriage penalty” at all. In fact, there’s a HUGE “marriage bonus”, for those “traditional” families with a Working husband, a wife with little or no income (and maybe a couple of kids.). The Tax Code was designed to benefit just that sort of family. Byt doing so, it can be disadvantageous to have two working spouses each with a nice income.