Do you own or manage a small business? Have you thought of hiring your child(ren) for the summer? We are not talking about breaking child labor laws here but if you do it right, everyone wins.
Kids can gain valuable real-life experience in the workplace while earning a little extra money over the summer. Your business will have extra help or someone to fill-in while other employees take vacations. And, there might be some tax advantages if it is a family business.
Most likely your child will not earn enough wages over the summer to pay taxes or at least very little income tax. However, your business might be able to claim a tax deduction for the wages paid. And if the business is unincorporated and your child is under 18 years old, neither your business or your child will have to pay FICA payroll taxes, in most cases.
It is best to follow these guidelines if you decide to hire your child:
<ul><li>Make sure it is a real productive job, even if it is very simple.</li>
<li>Don’t show favoritism and alienate regular employees.</li>
<li>Make sure the pay is reasonable for the job to avoid the IRS challenging it.</li>
<li>Keep payroll and all records like you do for regular employees.</li>
<li>Keep family disputes at home or do not hire your own child.</li></ul>
If you are unsure of the impact of hiring your child this summer, contact The Tax Shelter at 706.353.1711 for more information on the possible tax benefits for your company.