Why Hiring Your Children Is a Great Tax Strategy! | $12,950 Tax Free!
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- Опубликовано: 5 сен 2024
- In this video, I walk through the benefits of hiring your kids in a business that you own.
Some of the benefits including no FICA tax if your child is under the age of 18, you get to deduct the payment to your child in your business, and if you pay your child under the standard deduction - there is no tax that your child has to pay on their personal tax return.
The money that your child receives can be used to pay for their education, set up a 529 plan or even a ROTH IRA (since your child now has earned income).
Another important benefit on this whole process is that you are teaching your children on how to operate a business. They get to see you work. In addition, you can teach them about managing investments, if you set-up a ROTH IRA for them.
Now for the rules:
1. your child should be at least 7 years of age - there is court ruling that support this age minimum. if you plan to hire your child and they are younger than 7, then I suggest you have enough support in case you get audited by the IRS
2. have a written job description for what your child will be doing
3. pay them a reasonable wage
4. deposit the money directly into your child’s bank account
5. issue them a W2
6. MOST IMPORTANT - the work your child is doing relates to your business,
Finally, I walk through an example showing the benefits on a tax return.
About my channel:
Rob CPA channel was created with a mission to provide viewers with accurate content so they can be proactive in their tax planning strategies and build financial wealth. The video topics I selected reflect real-world issues that I’ve seen our clients experience relating to their personal tax returns, retirement plans, and accounting.
The channel allows me to share my passion for taxes, personal finance, and accounting. I create content I wish schools and entrepreneurship programs/accelerators would teach their students and companies. I take complex topics and simplify them for the viewers as well as show examples.
I will be covering the following topics:
- Personal & business tax planning tips;
- Personal finance;
- Accounting;
- Investing;
- Entrepreneurship
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#taxes #taxfree #businesstax
Let me know below if you have any questions about hiring your kids in a business that you own, and how $12,950 Tax Free works.
I am confused why does the title say 12950 while standard deduction is only 12550? Am I missing anything else?
Thank u. If I show my kid as my dependent I don’t get standard deduction of 12550. In order to get full deduction I may not show him/ her as my dependent. Then I lose CTC.
What if both parents have Indic businesses? Would they be able to hire the child for both business and use the standard deduction?
Great Video, thank you for sharing. One question if I pay my child using my LLC (Sole Proprietor) $ 10,000 for year 2023, he is under 18 years old son no taxes withheld nor taxes needed to pay, Do I still need to file form 941 or 944 as the Employeer? thank you
Thank you for watching.
Yes, and your child would get a W2...its just box 2 would be $0.
Track1099.com is a great tool to use to file these forms.
Great video. Thank you for the information. A question I have is, do you have to give a W2 for a child under 18 if you're filing as a sole prop?
I would like to know the same please
Great video. I wish I had seen it before my kids turned 18. Can we do the same if they are over 18? Thank you
glad you liked it.
you'll need to consider how they file and whether they will be claimed as dependents.
typically, this rule is for kids ages 7 - 18.
Thank you for the information. I have a child daycare from home, and I pay my daughter. She is under 18 years old but when I file my taxes where do I put the payments I made to her under Expenses or under contract labor and do I put payroll payments could you please help me thank you
Can you please help me to set up for hiring kids for my business?
We can't help directly, but reach out to your payroll company and onboard your kids, assuming they meet the criteria and did work for the company in 2023. You want to make sure you have a job description for them.
Thank you for the video. I have a question regarding the no FICA tax if the child is under the age of 18. If the child turns 18 in December, can the no FICA tax still be applied? Thank you.
Technically, they turned 18 in 2022, so it wouldn't apply.
Is the standard deduction of $12,950 no tax per child? And up to what age ?
We have two businesses. can we hire them for both of our businesses?
If I have a W-2 employee in my S-corp that makes $40k per year, is it advantageous to set them up on a similar plan like you’ve mentioned here (LLC Management Company) to avoid payroll taxes on the first $12,950?
No.
Can grandparents pay grandchildren this way, if they own a business?
Grandparents could potentially pay their grandkids (I assume you are referring to the change in ownership) vs. $16,000 annual limit. Make sure you have a good attorney and working with a CPA.
If you are referring to the $16,000 rule and just cash, yes, grandparents can gift each grandchild $16,000.
i have a question about credit card payment. I am using my OWN credit card to buy stuffs online. At the end of each month, my DAD uses his account to pay for me every monthly statement. Do I have to file tax that he helps me to pay for my credit card bill ? many people said i dont have to but i want to ask u to make sure
What amounts has your dad paid down each month? If its over the annual gift limit, then he would be the one filing a gift tax return.
@@rob_cpa only 800/month ...i think still under 16k...then how IRS knows if íts over 16k ? bc they bank does not send anything to IRS
Now parents can’t claim child as their dependent
You could still claim them as a dependent if they meet the dependent test.
has anyone try it? :))
Yes. We have clients that have used this strategy. If you follow the rules, it can be a great tax planning tool.