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Help Wanted Hire your Child Tax Free
Help Wanted Hire your Child Tax Free
by
Christine P Silva
If your child is under 18, you can pay your child up to 5,000 in wages a year without incurring most income taxes, most employment taxes, and you still get to write it off as a business expense on your own tax return! Many small business owners are unaware of this wonderful tax loophole. Is your teenager begging for a car? Well, put her to work and allow her to make the money for herself, while still giving you a tax break! Isn’t that a great deal?
There are a few rules you must follow. Your business cannot be incorporated, and you must pay them a reasonable wage. You must also substantiate the deduction. You can do this by paying your child by check, and making them sign a timecard when they begin their workday. If questioned, you must also prove “reasonableness” for the deduction, so don’t pay your 8-year old $5,000 to sweep your floor once a week.
This legal tax shelter is often overlooked. Hiring your children does not increase the chance of an IRS audit, and it allows taxpayers to show their children a good work ethic. Save money for yourself legally with this great deduction! So think about it-- can you hire your child? Remember, though—you have to be self-employed and own your own business.
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