Not a Proseries Question but a staff question

[judys3]

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.

[IRonMaN]

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.

[taxiowa]

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?

[jeffmcpa2010]

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.

[sewcpa]

Elem school age kids can water plants, file, stamp mail, walk across street to bank with my deposits, and update my software and the ring-binder paper tax library reference books.  My husband even found it easier to have our 10 yr old do the computer updates than to teach me to do that. She will be 40 yrs old this weekend!!!     My kids never got an allowance only paychecks.

The kids under 21 yrs are exempt from FUTA, under 18 yrs are exempt from FICA/Medicare. Your parent or your spouse is exempt from FUTA but FICA taxable

Many of my accounting clients have also used this strategy

[IRonMaN]

"Elem school age kids can water plants, file, stamp mail, walk across street to bank with my deposits, and update my software and the ring-binder paper tax library reference books."

Our 7 year old grandson knows his way around a computer so well that I might have to think about having him start developing tax software programs.  With him writing the program I'm pretty confident I could speak directly to the "engineer" in charge when I have issues.  😀

[dd4vols]

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.