Overlooked Tax Tip For Sole Proprietorships

If you have a Schedule C business (i.e., a “Sole Proprietorship”), you can hire your minor child and pay him/her up to the Standard Deduction ($6,100 for 2013) and incur a tax benefit. As long as your dependent earns less than the Standard Deduction, he/she doesn’t have to pay taxes; yet you can still deduct the expense on your Schedule C. In addition, since the dependent is your child, you are exempt from paying employer payroll taxes. Remember, the child must be under 18, and you still have to report the payroll (W-2, etc.). You also want to have him/her fill out a time card and document the work for your company.

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