Put your children to work for some tax breaks

September 2005

 

If you own a business, you could double your pleasure with one action. How? Give your child a job in your business, and enjoy a lower tax bill.

Hiring your child will give your business a deduction for the wages you pay, turning higher-taxed income into tax-free or low-taxed income at your child's rate. If your business is a sole proprietorship, you won't pay FICA taxes on your child's wages if he or she is under age 18. Your child can earn up to $5,000 tax-free in 2005, and if the child contributes to a traditional IRA, that amount goes even higher.

There are some basic rules: the work performed must be necessary to the business, the pay must be reasonable, and the child must be treated as an employee with the same payroll procedures being followed as with your other employees.

Please also be aware of child labor laws, including hours they can work, and duties they can perform.

If you would like more information on this topic, give us a call.

Maniar, Miller & Wechsler, LLC

2855 N. University Drive, Suite 600
Coral Springs, FL 33065
Phone: 954-75 CPA-MM (752-7266)

Fax: 954-345-0115
info@cpa-mm.com