Are you paying your kid (or grandkid) to work for your business? You’re not? You should.
No, I’m not saying you should put your four-year-old behind the receptionist desk to take calls. Or ask your middle-schooler to assist you in business deals. But if you have a teenager, you should strongly consider putting him or her to work. The benefits are enormous – especially during these difficult times. The next generation needs our help entering the workforce.
1. Your child can develop a work ethic.
You can teach your child, from a relatively young age, the importance of having a job, having a boss and having responsibilities. They can learn the value of showing up somewhere on time, doing what is expected and performing tasks under the supervision of someone else.
2. Your child can earn up to $12,000 per year without paying any taxes*.
This is assuming that they’re not doing any other work or earning other income. In case you didn’t realize, $12,000 is the standard deduction on any tax return, so if they’re not earning more than that…they’ve got no tax liability. It’s quite possible that you won’t even have to file a tax return either.
3. You may not have to pay taxes*.
As long as your child is under 18 (and you’re a sole proprietor or LLC) you won’t have to pay any social security or Medicare taxes. However, if you’re an S-Corp or C-corporation, you will have to withhold these taxes, but your child will likely receive them back as a refund. Your state’s rules may vary, so talk to your accountant. Regardless, make sure you’re keeping good documentation of their work hours and the work performed just in case the IRS raises a red flag.
4. You can take a deduction*.
It’s a legitimate business expense as long as your child is at a reasonable age and performing reasonable work that someone else would be paid to do.
- Database work
- Warehousing, etc.
Not only that but you can still claim your child as a dependent or receive the child tax credit if you qualify.
5. You get to spend more time with your kid.
It’s kind of nice having them around this summer, isn’t it? Time flies so every minute counts. And they can see you too – in action, with other people, being the boss. You’re not just that lump that sits in front of the TV watching sports. You’re a real person, a leader, the head honcho. At least during the day.
6. Finally, you get to take the check out of their hands.
Yes, that’s right – out of their hands. As soon as you give them the paycheck, you grab it and immediately stick it in a savings account. Because you know they’ll spend that money as soon as they can, right? Put the money in a 529 College Savings Fund so that it can grow tax-free* and be used for higher education expenses some day in the future. College is kind of expensive, did you hear?
Kids today. They’re lazy and don’t respect their elders, right? OK, that’s what my parents said. And what their parents said about my parents. And on and on. Your kids, and their generation, are no better or worse than any generation before. They want to work. They want to earn. And you can give them this opportunity – and use it to save a few bucks for yourself too!
Original Article: HERE. *This is not tax advice and we are not tax advisors. *Please consult with your tax advisor and the IRS and State and Local tax laws first for current and correct information.