Quick definition of a “mixed marriage” (as coined by PK Tax Services):
A couple in which one or both is a wage earner and one or both is self-employed or a business owner. The size and type of the business is irrelevant. There are many scenarios, but all come with their own set of unique tax implications. Note: There is a huge difference between being self-employed and being a business owner. A self-employed person, for the most part, does every task (all the responsibilities) in his/her business endeavor; while a small business owner hires others to perform task and manages them and the business. |
Why is this market important?
We are watching two trends in this arena because they affect a growing percentage of our clients and because we are seeing them starting to merge together.
Trend #1: Dual-earner couples
In the last two decades, a sharp rise in the share of married couples with two earners has taken place, accompanied by increasing equality of the earnings of husbands and wives, particularly among couples with higher incomes. Those changes, occurring for couples with and without children, have contributed to a rise in the share of couples incurring marriage penalties.
Between 1969 and 1995, the proportion of working-age married couples with two workers grew from 48 percent to 72 percent. By itself, that shift tended to increase marriage penalties and reduce bonuses.
The shift toward two-earner couples has been accompanied by increasing equality of the incomes of husbands and wives. Between 1969 and 1995, the fraction of working-age couples in which both husband and wife earned at least one-third of the couple’s income doubled from 17 percent to 34 percent. The greater equality of spouses’ earnings increased both the share of couples incurring marriage penalties and the size of those penalties.
Source: Congressional Budget Office
Whatever the case, when there are two wage earners in a household, it is easy to work with their withholding to ensure that the taxes that will be owed are paid prorata throughout the year to avoid penalties and interest.
Trend #2: Growth of Self-Employment
The US is in the midst of quite a boom in self-employment.
2004 data show that 19.5 million Americans are self-employed, and both their numbers and the rate of self-employment are growing. Between 2003 and 2004, the number of self-employed grew by 1 million (about 4.7%).
We are watching two trends in this arena because they affect a growing percentage of our clients and because we are seeing them starting to merge together.
Trend #1: Dual-earner couples
In the last two decades, a sharp rise in the share of married couples with two earners has taken place, accompanied by increasing equality of the earnings of husbands and wives, particularly among couples with higher incomes. Those changes, occurring for couples with and without children, have contributed to a rise in the share of couples incurring marriage penalties.
Between 1969 and 1995, the proportion of working-age married couples with two workers grew from 48 percent to 72 percent. By itself, that shift tended to increase marriage penalties and reduce bonuses.
The shift toward two-earner couples has been accompanied by increasing equality of the incomes of husbands and wives. Between 1969 and 1995, the fraction of working-age couples in which both husband and wife earned at least one-third of the couple’s income doubled from 17 percent to 34 percent. The greater equality of spouses’ earnings increased both the share of couples incurring marriage penalties and the size of those penalties.
Source: Congressional Budget Office
Whatever the case, when there are two wage earners in a household, it is easy to work with their withholding to ensure that the taxes that will be owed are paid prorata throughout the year to avoid penalties and interest.
Trend #2: Growth of Self-Employment
The US is in the midst of quite a boom in self-employment.
2004 data show that 19.5 million Americans are self-employed, and both their numbers and the rate of self-employment are growing. Between 2003 and 2004, the number of self-employed grew by 1 million (about 4.7%).