Hiring Family
Hire Your Kids…Don’t Give Them An Allowance
The tax law allows a business a reasonable amount of deductions for compensation paid for services provided to the business. The good news is a home-based business is no exception. Better news is you may have a built-in workforce right under your nose — your spouse and children! The best news is that your business and your family may realize tremendous tax benefits from hiring family members. It is a way to give your children invaluable business experience – while they are helping you build a college education fund (Educational IRA) with the taxes that are saved.
One of the best tax strategies for business owners is to pay wages to family members. In order to do so: first, your business must have a genuine need for an employee’s services; and second, the family member must be genuinely capable of the task; the wage rate must be comparable to local area rates for the tasks being performed. This is particularly important when you are employing the services of a child under the age of 18. In addition, when a child is hired there is increased need to keep detailed documentation of the duties that child performs in your business. We offer a reasonably priced payroll service that provides strong documentation that you are complying with all the rules in this area.
“Making Tax A Game” explains many more tax saving benefits of hiring family:
Qualified Retirement Plan contributions are deductible by the employer, tax-deferred to the employee, and include many more tax and investment benefits.
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