Not a Proseries Question but a staff question

Forum|Forum|1 year ago
October 30, 2024
3 replies
12 views

Has anyone employed their child, paid them under the standard deduction amount to avoid extra taxes? My daughter does work for me and she's 14. I have always just given her an allowance but have thought about adding her on as payroll. Wondering if it raises flag of suspicion adding her now.

Business

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IRonMaN

Level 15

If she is doing work for you there isn't any reason not to pay her as long as she is paid a reasonable rate and you document the hours that she worked for you during the year.

Slava Ukraini!

taxiowa

Level 8

Many people employ their children or wife/husband in their work. You have to make sure it is reasonable pay for reasonable work. Would you have to hire someone else to do the work your daughter is doing? And get her a time sheet to fill out like a normal employee. In Iowa she would not be subject to unemployment ins but not sure your state. When she turns 18 you have to start withholding FICA.

Only drawback maybe benefits. If you provide an employee/daughter with health insurance are you providing or offering all other employees health insurance?

J

jeffmcpa2010

Level 10

I paid both of my kids to do copying and filing during tax seasons, Paid a wage I felt I could justify, and reported on all the payroll tax returns I was required to file. I also "gifted" them an amount equal to their W-2 which was contributed to a Roth IRA. Each of them worked for me for around 5 years, and now close to 40, they have significant ROTH balances. The compounding of getting retirement accounts started at 13 or 14 years of age is incredible.

I don't remember the ratio - But a good chunk of each paycheck went into savings...

I had no other employees, so I didn't have any benefit issues to deal with.

dd4vols

Intuit Community Champion

I believe these options of no FICA, no MC, no WH, no SUTA, no FUTA, are not available if you are a corporation or s corp. You have to do standard payroll deductions in these cases.

I have a lot of Sole Proprietorship/Single Member LLC clients that take advantage of the tax breaks of employing their kids. The most creative one I have, yet to date, is this real estate broker, who has his kids' pics up on his advertising billboards. They were obviously too young even to water plants.

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