1099 Rules for Business Owners in 2024
How to Pay Your Kids and Save on Taxes: A Friendly Guide for Business Owners
Hey there, fellow business owners! Are you looking for a smart way to save money on taxes and involve your family in your business success? Well, then buckle up, because today we’re talking about paying your kids! That’s right, this can be a win-win for everyone.
Tax Benefits Galore!
Did you know that paying your children under 18 can be a fantastic tax strategy? It’s true! There’s no need to withhold income or payroll taxes, which means more money stays in your pocket (and theirs!). On top of that, the first chunk of their earnings is usually tax-free thanks to the standard deduction.
But It’s Not Just About Taxes
There are many other benefits to consider. Involving your kids in the business can teach them valuable lessons about responsibility, money management, and even entrepreneurship. Plus, it’s a great way to get some extra help around the business!
The Rules of the Road
Now, there are some key things to keep in mind. First, your kids need to be legitimately working for the business. No chores around the house count! They should be performing age-appropriate tasks and you’ll want to keep track of their hours.
The way you pay your kids depends on their age and your business structure. For younger kids, it’s usually easiest to pay them as outside labor through a sole proprietorship or single-member LLC. For adult children, you have more options, like regular employees or even subcontractors.
Don’t Worry, I’ve Got Your Back
This can seem complicated, but don’t worry! There’s a lot more to unpack here, and I go into all the details (including some cautionary tales!) in Chapter 12 of my book, “The Tax and Legal Playbook.”
The Takeaway
Paying your kids can be a fantastic way to save on taxes, teach them valuable skills, and even get some extra help with the business. If you’re a business owner with kids, this is definitely a strategy to consider. Just remember to follow the rules and talk to your CPA to make sure you’re doing it right.
