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| Hiring your child to work for you | Views: 1232 |
| Mar 24, 2006 6:29 am | | Hiring your child to work for you | # |
Jerrilynn Thomas, Founder WomenPartner Int'l | | Hi Suzette,
Is there a lot of paperwork involved in hiring your child to work for you?
Jerrilynn B. Thomas
International Virtual Women's Chamber of Commerce
http://www.ivwcc.orgPrivate Reply to Jerrilynn Thomas, Founder WomenPartner Int'l |
| Mar 24, 2006 4:54 pm | | re: Hiring your child to work for you | # |
Suzette Flemming | | Hi, Jerrilynn ~
That is a great question. In some states such as Washington, you need to add a special indorsement to your business license to hire minors (even if they are your children).
They must be paid at least minimum wage and they must perform functions within your business that you would hire someone else to perform. You will need to have a job description for them to prove this to the IRS if you are ever audited.
Suzette
*****
Saving Money - Increasing Profits
www.FlemmingBusinessServices.com Private Reply to Suzette Flemming |
| Mar 24, 2006 10:34 pm | | re: Hiring your child to work for you | # |
Sue Copening | | RE: Hiring your children.
Dear Jerrilynn...
Hiring your children can be a huge advantage... for one.. you don't have to take out federal withholding on money paid to your own children (under 18) and they don't have to pay taxes on the first chunk of that (about $4800 per year - check for this years figure). You do need to check on state income tax requirements for your state.
You can pay them MORE than that... on the money over that threshold, you get the tax deduction in YOUR tax bracket... they pay taxes in theirs... which will be less.
Also.. you can pay an 8 year old real world adult wages if you can justify it with outside evidence. For instance... what does a company like Kelly Services pay for "unskilled" labor ($15 hr maybe)? Can your 8 year old lick stamps and stuff envelopes at the same rate? Perhaps you have a child who enjoys working on the computer. They could easily learn Quicken and handle your accounting work, doing updates on your web site, etc. You could be paying them $14 an hour and still be under what you would pay an outside service. Get them to agree to put at least half their income in their college fund.
Also... a working 8 year old gets to have something most 8 year olds can't... an IRA. Add to that a traditional college investment program and talk about building a college fund quickly! AND... with tax free money!
Of course... they DO have to do the work. This has to be a legitimate job.
How do you prove this?
Time sheets with hours worked and tasks performed... such as...
"Stuffed 309 marketing pieces" - 3.5 hours
"Office Depot to pick up supplies: - 1 hour
"Accounts receivable - monthly summary" - 2 hours
Also... you must give them a W2 and you must pay them by check... from your business account to their account.
By the way... legally the money is THEIRS. So while you can jointly hold the checking account with them... they need their own account to deposit this money in. And while you can guide them in spending, or investing the money... you can't "control" it. Also... you can't turn around and make them pay you for rent, food or other expenses you normally pay anyway. Point being... if you did, it will not apppear to be a legitimate employer-employee relationship, right? So make sure that they really want to work for you and that their goals, and yours (college fund - vacation - summer camp - start up $ for their OWN business) are the same.
Treat them like you would ANY employee to bullet proof your situation and prove it's real. But with each child capable of receiving around $5000 yearly in tax free money.. .and deductible money for your business... why would you want them working anywhere else but in the family business?!
Here's another incentive for the kids... since they will be helping build their own college fund... they will have more "say" in what college they are allowed to go to. What would be their "dream" school? Or perhaps they want to start their own business with their investment one day, buy a house, etc? Teaching your children financial independence early is one of the best things you can do as a parent!
NOTE: Make sure you comply with your state labor laws... but in most states it is OK to employe a child over the age of 7 if they are working for the parents in the home or a safe environment. Call your state to find out your regulations.
if you want more info...
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Tax Strategies for the Self Employed and Independent Contractor
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Sue Copening
http://www.ConnectionsGroups.com/LocalSpeaker/SueCopening.htm Private Reply to Sue Copening |
| Mar 30, 2006 6:59 am | | re: re: Hiring your child to work for you | # |
Jerrilynn Thomas, Founder WomenPartner Int'l | | Thank you so very much Sue!
Jerrilynn B. Thomas, CEO
International Virtual Women's Chamber of Commerce
Facilitator of partnerships between busy business and professional women
http://www.IVWCC.orgPrivate Reply to Jerrilynn Thomas, Founder WomenPartner Int'l |
| Mar 30, 2006 7:02 am | | re: re: Hiring your child to work for you | # |
Jerrilynn Thomas, Founder WomenPartner Int'l | | I'm sorry for the delay in responding Suzette. I have to schedule time to network on Ryze in between my chamber duties. As always, your advice is great. I plan to put my 12 year old to work.
Jerrilynn B. Thomas, CEO
International Virtual Women's Chamber of Commerce
Facilitator of partnerships between busy business and professional women
http://www.IVWCC.orgPrivate Reply to Jerrilynn Thomas, Founder WomenPartner Int'l |
| Mar 30, 2006 10:09 am | | re: Hiring your child to work for you | # |
Maria Marsala | | Here is a good resource on this subject
http://www.taxmama.com/Articles-arch/Tips4Families.htmPrivate Reply to Maria Marsala |
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