Comments on: Hiring Your Children as a Tax Loophole

By: Steve

Steve — Mon, 02 Apr 2018 20:20:26 +0000

In reply to MnM. It's the standard deduction that allows him to not pay taxes on any of the W-2 income he earned. It really has nothing to do with where he earned the money. Therefore, he just needs to file a tax return and he'll get the refund...

By: MnM

MnM — Mon, 02 Apr 2018 19:10:57 +0000

Last year I hired my dependent child to work at my sole proprietor home business. He also worked part time with another company. Combined income earned for both jobs is still under the $6350 for 2017, but he should only be accountable to pay taxes on the outside job. How does he file so that he can get a refund of taxes withheld at the outside job, without having to pay taxes on what he earned at our family business?

By: Annie

Annie — Fri, 16 Mar 2018 17:00:37 +0000

Hi Steve,
Great info! Say I pay my child (<$6300 a year) through W-2 for clerical work she does for my business, and she doesn't have to file income tax return because it's < $6300, for my personal tax return:
-Can I still claim her as a dependent?
-Do I have to include her W-2 in my personal return?
Many thanks!

By: Charles

Charles — Sat, 10 Feb 2018 02:58:41 +0000
In reply to Tammy. This article is about hiring for a business. Money for household chores doesn't count. Babysitting for a neighbor would count, but I doubt too many neighbors want a 7 year old baby-sitting.

By: Kanu Jain

Kanu Jain — Thu, 07 Dec 2017 04:10:16 +0000

I am real estate agent and thinking of hiring my 15 yr old to help in marketing and managing finances. I have asked his high school for permission. I am not sure what tax implications it wld have on my taxes.

By: Steve

Steve — Wed, 15 Nov 2017 22:08:46 +0000
In reply to Rob. You should be able to pay him without payroll taxes as long as he's under age of 18...

By: Rob

Rob — Sat, 11 Nov 2017 17:58:38 +0000

I am doing this with my kids this year and working great. Next year my son turns 18 in December,
Can I still pay him and not pay any of the other SS and FUTA taxes if I pay him before he turns 18, say in the summer months? Or does all this go away in the year he turns 18?

By: Steve

Steve — Tue, 07 Nov 2017 22:45:51 +0000

In reply to Gary Harshberger.

Sorry Gary for not being clearer, but here’s how I think this might work in some family situations…

Grandpa, a business owner, is going to pay for a grandkid’s school. Say the school costs $10K and that grandpa’s tax rate is 50%. In this case, grandpa needs to make $20K so that after paying the $10K in income taxes, he has $10K left over to pay for the $10K of school.

In comparison, if he just pays grandkid $10K for a job and the kid pays zero income taxes (because of the standard deduction and the personal exemption) those $10K of income taxes that grandpa would have paid aren’t paid.

Further, the grandkid by having earned income may qualify for an education credit.

By: Gary Harshberger

Gary Harshberger — Tue, 31 Oct 2017 16:39:04 +0000

1. “Kids and Grandkids as Income Tax Loopholes”
How is hiring grandkids a tax loophole? Your comment says you cannot avoid social security/medicare tax for grandchild, only parents can do that, so what benefit is there to the grandparents other than maybe FUTA and SUTA (not sure about these)

2. And that “tax bill might be easily ground down to nearly zero if the child or grandchild qualifies for tax credits the business owner can’t use.”—-What kind of business credit can be passed to a child?

Thanks

By: Steve

Steve — Thu, 05 Oct 2017 17:48:40 +0000

In reply to Ashley.

If you’ve got a child modeling for photos, yeah, I think so.

I wouldn’t go hog wild. And you’d want to try to find out what market rates are in your area…