Help Wanted? Hire your Child Tax Free!
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Finance > Tax Tips
Mar 1, 2007
Christine P Silva
Help Wanted? Hire your Child Tax Free!
If your child is under 18, you can pay your child up to 5,000 in wages a year without incurring most income taxes, most employment taxes, and you still get to write it off as a business expense on your own tax return! Many small business owners are unaware of this wonderful tax loophole. Is your teenager begging for a car? Well, put her to work and allow her to make the money for herself, while still giving you a tax break! Isn?t that a great deal?
There are a few rules you must follow. Your business cannot be incorporated, and you must pay them a reasonable wage. You must also substantiate the deduction. You can do this by paying your child by check, and making them sign a timecard when they begin their workday. If questioned, you must also prove ?reasonableness? for the deduction, so don?t pay your 8-year old $5,000 to sweep your floor once a week.
This legal tax shelter is often overlooked. Hiring your children does not increase the chance of an IRS audit, and it allows taxpayers to show their children a good work ethic. Save money for yourself legally with this great deduction! So think about it-- can you hire your child? Remember, though?you have to be self-employed and own your own business.
There are a few rules you must follow. Your business cannot be incorporated, and you must pay them a reasonable wage. You must also substantiate the deduction. You can do this by paying your child by check, and making them sign a timecard when they begin their workday. If questioned, you must also prove ?reasonableness? for the deduction, so don?t pay your 8-year old $5,000 to sweep your floor once a week.
This legal tax shelter is often overlooked. Hiring your children does not increase the chance of an IRS audit, and it allows taxpayers to show their children a good work ethic. Save money for yourself legally with this great deduction! So think about it-- can you hire your child? Remember, though?you have to be self-employed and own your own business.
Article Source: http://www.articlerich.com
Christine P Silva, BA, CRTP, lives in California with her husband, two children, and three spoiled cats. She earned her undergraduate degree from San Jose State University, and her advanced accounting certificate and tax license from Cosumnes River College. writes primarily non-fiction material, and enjoys writing about financial wellness, income tax matters, health, and senior issues. Please visit her website at www.vrpp.org/
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