Hire
Your Kids!
Free Info on our recommended Medical Transcription Program leading to an exciting home based medical transcription career
 It's
hard in today's turbo-charged world to find time to spend
with family. Why not do as a growing number of creative small
business owners are doing and hire your kids?
Not only does this give you a great
opportunity to spend some quality time interacting with those
closest to you, it also provides a rare opportunity for them
to learn meaningful skills and acquire valuable training that
will serve them well into the future.
Hiring your kids can also be a financial
winner for all concerned. You get a tax deduction and your
kids get some extra income. The IRS allows reasonable wages
paid to minor children to be deducted the same as any other
business expense. The key word is reasonable. As long as the
wages you pay to your children are in line with wages you
would pay to another person doing the same job, you should
not have a problem claiming the deduction.
The beauty of this type of arrangement
is that you will be able to effectively shift income away
from your business to a child who will probably be in a position
to shelter the entire income from taxation (depending on the
amount). Currently, children under the age of 18 can earn
approximately $4,700 (for year 2002) in income without owing
any federal income tax. It may also be possible to avoid FICA
tax withholding - depending on the legal structure of your
company. Check with your accountant to see if your business
qualifies.
Before putting your kids on the
payroll however, you should consider the following:
Get some professional tax advice.
While the tax law provides for
the employment of minor children, there are some specific
requirements and guidelines which must be adhered to in order
to stay in the good graces of the IRS. It is always advisable
to seek professional guidance as you structure an employment
arrangement of this type.
Establish formal job agreements with your
employed children.
Formalizing a child's job responsibilities
will provide important documentation in the event of a tax
audit. It should go without saying that the work that is being
performed should be relevant to the ongoing operation of your
business. Mowing the lawn, for example, will probably not
qualify as a legitimate business deduction. Formalizing a
job description will also provide a valuable tool to help
your child understand exactly what is expected of him or her.
Keep careful records of work performed
and payments made.
It will be important that you be
able to demonstrate exactly what work was performed and what
payments were made to your children in the event of an IRS
audit. Detailed records will go a long way toward satisfying
the curiosity of an inquiring IRS agent.
Be sure to complete and file all required
tax forms.
Again, this is an area where professional
guidance will be important. For starters, you will need to
fill out W-4 forms for each of your children that will be
on your payroll. If FICA tax witholding is required you will
need to treat wages paid to your children as you would any
other wages. Don't forget that even though your child may
not owe any taxes, it may still be necessary for them to file
a tax return.
Free Info on our recommended Medical Transcription Program leading to an exciting home based medical transcription career
| 
