Sole Proprietor? Hire Your Kids!

If you’re a Schedule C Sole Proprietor and are looking for some extra help, think about hiring your own kids. If you have minor-age children (17 and under), you can add them to your payroll without having to pay the employer payroll taxes or Workers Compensation. In addition, if they earn under the Standard Deduction ($6,350 in 2017), and they are your dependent, they won’t have a tax liability. The kicker here is that your business gets to deduct your kids’ payroll, and your kids don’t have to pay taxes on the money earned (as long as it stays under the Standard Deduction).

You still have to treat them like any other employee– have them fill out a time card, pay them via payroll and issue them a Form W-2 at year-end.

If you do this correctly, it’s a great way to put away funds for college, as well as teach your children responsibility and important skills.

 

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