Hiring Your Children

If you are looking for ways to decrease your tax liability, help your child learn work ethic, and get them started on saving for their future paying your child for work they do for your business may be right for you. Think about these items when making your decision on whether to hire your child:

• Start here with this great article on child 🚸 labor laws and what applies to your children versus an unrelated child.

• Make sure the wages 💲 you pay them are age appropriate. It may not be reasonable to pay a 2 year old for work but you may have a 7 year old that can help empty trash cans and help sweep up.

• From here you will need to decide whether they are a contractor or employee. See my helpful guide here on that. Once you decide here is how having them on your books 📚 will look.

  • Employee: if your business is structured as a sole proprietor you are able to pay your child younger than 18 and they are not subject to FICA. You will issue them a W-2 at the end of the year and as long as their income is below the standard deduction ($12,950 for 2022) they won’t have to file a tax return. See this helpful article on how other entity types handle paying children of the owners.

  • Contractor: everyone, including minors, must file a tax return if they had net earnings from self-employment of at least $400. The self-employment tax is 15.3%. As long as it’s still below the standard deduction there won’t be any federal tax due- just the self employment.

• If your child has earned income from working for you they become eligible to contribute to a ROTH IRA 📈- help them save for the future!