Family Payroll: Hiring Your Kids

Generally, anyone with children can take advantage of one of the greatest tax saving opportunities granted by Congress. This tax benefit was established by Congress to both encourage home businesses with tax free earnings, and also encourage saving for higher education using tax deferred earnings with Educational Individual Retirement Accounts.

For each child employed in the family business, you are entitled to deduct up to $5950 annually tax free for each child. Just the savings in Federal taxes alone approaches $2,000 for each child. At a recent fireside we were explaining this benefit to a group of firefighters from Los Angeles. We were asked this question at the conclusion of our presentation.

“You mean to tell me that if my son pays my grandson $5,950 per year, and puts the entire $5,950 in a joint bank account with no taxes deducted that my son can turn around and spend the money any way he chooses, and then at the end of the year Uncle Sugar will send us another $2,000.”

I am happy to tell you, that’s exactly how it works.

His response was, “…that makes no sense at all.”

There’s nothing logical or sensible about our tax system, but that’s just one of many benefits available to home-businesses.

Here’s how it works:

When you take the $5,950 deduction on your Schedule C, your Federal refund will approach an additional $2,000!!! 🙂

Here’s what you have to do to qualify:

Basically we offer a turn-key service for $144 per year or $17 per month.

Some states do have some minimal fees even though the payroll is tax exempt.