Deducting Child Wages
If you have children under the age of 18 that you can employ to do work in your business, you can not only teach them some valuable lessons about work and money management, but you can take a great tax deduction that can benefit you in several ways. Not only can you deduct the wages paid to your child, you also do not have to pay FICA and Medicare taxes on those payments like you would adult employees.
You are also exempt from having to pay unemployment taxes on their wages. Since they can earn up to the standard deduction before having to pay any income taxes, you can pay them several thousands of dollars a year in wages and it will be tax deductible to you and tax free to them.
In order to take this deduction, you need two things:
Documentation of the work they did and the time spent doing it (if you choose to pay them hourly) and a documented paper trail of actually having paid them the money.
Deductr assists you in efficiently documenting the details of what they did and the hours worked to accurately record their employment. You can produce a child wage report from the Reports tab which becomes part of the documentation you will need to verify these wages.
Here's a suggestion, consider making your child your social media marketer. Today's kids are lightyears ahead with regard to the internet and social media on both the PC and mobile devices. Why not have them manage the online and mobile presence for your company? Younger children can clean your office, shred old documents, or help pass out fliers and literature for your business. There are many ways to put your kids to work for your company and take advantage of this tax strategy.
Note: The MOST you can pay a child employee (under the age of 18) is up to the STANDARD DEDUCTION amount, which is dependent on your filing status, before they have to file taxes of their own. Please verify the standard deduction on the federal tax rates chart. Be aware that any other source of payment your child receives throughout the year will increase the child's total income.
Grandparents: You must be the legal guardian of your grandchildren to implement this strategy in your business.
Consult your tax professional to see if this fits your circumstances. This is not to be taken as tax advice. Please refer to our End User License Agreement.