Take home pay! What all of us work for, right? Well, what about "keep home pay?" That is what you can create if you hire your children in your business. Not only will they by getting money to work, but it will be from your business so it will stay in the family. In addition, it can provide substantial tax benefits for you and for them now and in the future. So, needing some help in your business? Look first to your children.
Reporting their income is as simple as reporting any other employee you would hire. Payroll Form 941, line 2. You deduct their wages (what you paid them). Then if they earn enough income, either from your business or other sources, to require Federal or State income tax witholding, you will have benefited with a tax deduction for your business for it. And your child has added another source of income. Hey, every little bit helps!
When you know how to do this right, you not only have the benefits of having your children work with you and learn the business, but you put money in your pocket in taxes saved. Here's how it works: You hire your child as your employee; you pay them wages of $5,350.00 for their year's work; in addition, you establish an IRA retirement account in your child's name for $4,000.00. Those three steps accomplish the following benefits: You have the pleasure of having your child working with you in your business; you have the opportunity of teaching them about earning money by fruitful work; you have provided them with extra income; you have provided them with a great beginning toward retirement, teaching them the value of saving. By the way, did I mention to other benefits? Like the fact that you have just taken $9,050.00 out of your business as employee expenses but have saved $1,385.00 in FICA and Medicare taxes on that expense. Don't worry if you can't afford to pay the above figures. It works for you no matter how much you pay them. Those are just the Federal maximums allowed before your child starts to pay income tax.
This article provided by Debbie "The TAXpert" Cumberland. We encourage you to pas it on, as long as you do not make any changes to either the article itself or the author information and links.
Reporting their income is as simple as reporting any other employee you would hire. Payroll Form 941, line 2. You deduct their wages (what you paid them). Then if they earn enough income, either from your business or other sources, to require Federal or State income tax witholding, you will have benefited with a tax deduction for your business for it. And your child has added another source of income. Hey, every little bit helps!
When you know how to do this right, you not only have the benefits of having your children work with you and learn the business, but you put money in your pocket in taxes saved. Here's how it works: You hire your child as your employee; you pay them wages of $5,350.00 for their year's work; in addition, you establish an IRA retirement account in your child's name for $4,000.00. Those three steps accomplish the following benefits: You have the pleasure of having your child working with you in your business; you have the opportunity of teaching them about earning money by fruitful work; you have provided them with extra income; you have provided them with a great beginning toward retirement, teaching them the value of saving. By the way, did I mention to other benefits? Like the fact that you have just taken $9,050.00 out of your business as employee expenses but have saved $1,385.00 in FICA and Medicare taxes on that expense. Don't worry if you can't afford to pay the above figures. It works for you no matter how much you pay them. Those are just the Federal maximums allowed before your child starts to pay income tax.
This article provided by Debbie "The TAXpert" Cumberland. We encourage you to pas it on, as long as you do not make any changes to either the article itself or the author information and links.
About the Author:
Debbie "The TAXpert" Cumberland has been helping clients save money on their taxes for over 25 years. She has written a Mini-course available to your free: "TAXpert Tips Online". She also is the author of "TAX Savings: Key to Maximizing Profits Let her help!
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