Tax savings by hiring your children
You have heard that you can not have your cake and eat it too. But hiring your own family is a case when you can. Pay your minor children or adults to work for your company, please write-off as an expense.
Many people are confused as to whether it is legal to hire their children and grandchildren. Follow my advice to meet both the IRS and employment laws - while saving on your own taxes. Assuming that this is a true payment for services rendered (and documents are handled properly), it is perfectly legal and acceptable to pay family members.
Minor children save the most taxes
Child labor restrictions do not apply to a parent (unless it is in manufacturing, mining, or any hazardous work is defined by the Department of Labor) - even in 16 years. I hired my own daughters of only 7 and 9 without problems.
You do not pay withholding tax, payroll taxes (including Social Security) and Workmen's Compensation (in most states) until the child reaches 18. Just remember to complete quarterly returns for payroll tax that you need for each employee. Forget about paying federal taxes of unemployment until the child reaches twenty-first
But if your business is an S corporation or C, you must pay Social Security and Medicare, regardless of age.
To survive IRS scrutiny reservation
Children first have to work
2. Regularly pay
The third pay according to what you would pay another
Keep detailed records fourth
5. Problem W-2 at the end of the year and return the child, even if no tax is due
Example:
Wages paid to children 13 years $ 6,200
Less: Standard deduction for 2005 (5000)
The taxable income of $ 1,200
Tax due (10% x $ 1,200) $ 120
As for the parents:
Wages paid $ 6,200 for children
Tax savings (40% x $ 6.200) $ 2,480
For a net savings of $ 2,360 family
Deduction of income tax is $ 5,000 for each person in the country, including each of your minor children. So unless you pay them more than that, they will have no tax liability at all. And when they really deserve it, "the tax rules for children" do not apply.
By the use of adult family members you can justify higher wages. And they can participate in benefits like qualified cessation programs and benefits (such as health insurance and child care).
Working with you to teach children about managing money and saving
Supply has earned a son, so the amount is taken into account, the value of what has been done. And the money does not belong to them, even if it is saved for college.
Many of the benefits of involving your child in operation, are not related to taxation at all. They gain practical experience, learning the value of work, and perhaps how to run the family business on the road.
If you're wondering if you trust my advice, I sat on both sides of the table. I worked for the IRS, and since he left there about a thousand led seminars on financial planning and taxes. I'm talking about real estate and banking professionals across the country, and found that everyone wants to learn smart strategies that bring reliable financial returns - without going into tax problems. In my opinion, is to lease one family of them.
Do not hesitate to put the troops at work. When you take your child you are teaching them skills they can use the long haul. They are learning the value of the dollar - and how hard you must work to earn them. And the bottom line, it makes good economic sense.