At Guardian Tax Law, we work with multiple professionals around the United States that help their clients with tax strategies, planning, and preparation. CPAs, realtors, financial advisors, and other attorneys often refer their clients to us for help with tax debt resolution and we often refer to them to help clients stay out of tax trouble in the future.
Our friend and colleague, Marya Wheeler, CPA, was kind enough to contribute this guest post to share with you. It’s a quick read that we think you’ll find interesting and informative. Visit Marya’s website for more helpful tax saving tips.
The Tax Saving Benefits of Hiring Your Kids
If you are self-employed, one advantage to operating your own business is that you can hire your kids or grandkids to work for you. Not only is this a great way to teach them valuable skills, but there are tax saving benefits to hiring young relatives, as well. And now that it’s summer and the kids are home from school, this is a good time to consider it.
If the children are under age 18, you are not required to withhold social security and Medicare taxes from their wages. And until they are 21, you are not required to pay federal unemployment taxes on their wages.
You must legitimately employ them in your business—not just assign them household chores—and you should keep records of the time worked, making sure their wages are reasonable.
If you are in a Partnership, this tax-savings strategy also applies as long as the parents are the only partners. These rules don’t apply, however, if you are incorporated. You can still hire your children, but they are subject to normal payroll taxes regardless of their age.
This is a good tax savings strategy for small business owners, and it is sadly underutilized. If you like the idea of hiring your children or grandchildren but have questions, give me a call.
Contact Marya at email@example.com or (520) 270-1279 for a free consultation.