They say good help is hard to find, but it may be sitting right at your kitchen table. Hiring your kids to work in your business can be a great opportunity to build your child’s confidence and self-esteem while giving them valuable on-the-job training. We are not talking about a small allowance for minor tasks, but instead a real job with real responsibilities. Children are capable of so much more than we give them credit for. With the right encouragement, they can do amazing things.
Tax Savings for Business Owners Who Employ Their Children.
Not only does working in the family business encourage the child, but it carries incredible tax benefits for the family as well. The wages paid to a child under the age of 18 who works for his parent in a trade or business (sole proprietorship or a partnership in which each partner is a parent of the child) are not subject to Social Security and Medicare taxes. Payments for the services of a child under the age of 21 are not subject to Federal unemployment (FUTA) taxes. This can add up to big savings.
There are tax limitations and rules which concern hiring your children. For example, make sure that the wages are reasonable and paid for actual duties performed and keep good records. Realize the same recordkeeping, time cards and reporting as required for non-family member employees will be required. More information on hiring your children can be found at www.irs.gov website.