When your child reaches a certain age, you feel it’s time for him or her to get a job. And what better place than with you at your own company? You’d be able to monitor your child to keep them safe, they’d receive valuable work experience, they could have some money of their own to help pay for a car or even college, and you can even avoid paying payroll tax for your child! That is, if you know how.
The maximum amount that you can pay a child without having to include them in payroll taxes is $12,000. This number has recently increased from 6,300 to 12,000 in 2019. What does this mean for you? This means that as long as your child’s yearly income doesn’t exceed the maximum amount allowed, you are legally not required to include your child on your payroll taxes.
Yes! It is exactly that simple! However, make sure to properly document the number of hours worked and the tasks performed to ensure that your company is safe from any accusations. The more organized and documented the job of your child is, the easier any issues regarding payroll for your child can be solved.
When you own a corporation the process gets a little trickier, but still reasonably do-able! By creating a separate sole proprietorship under the name of you and your spouse, you could pay your children while still avoiding payroll tax even if you do own a corporation. This separate company is paid by the corporation to manage tasks and other jobs for them. Thereby, this action is perfectly legal and the perfect solution for you.
If you are seeking more information on how to save money for your company and invest in your family, contact us. Our certified and knowledgeable staff can assist you in gaining your financial advantage.
Tax Tips for the Self-Employed
Everything You Need To Know About Second Draw PPP Loan
Small Businesses Are Expected To Get More Audit By IRS in 2021
Everything You Need To Know About Form 1099-NEC