Hire Your Children if You are
Self-Employed
Save your business some payroll taxes
If you are a self-employed business owner and you are
short on help, hire your children. One of the key advantages to hiring
your children is that it will save you some payroll tax.
If your children are under the age of 18, you are not
required to withhold Social Security and Medicare from their wages, nor
are you required to pay in the employer’s share.
You are not required to pay federal unemployment tax
on their wages until they reach the age of 21.
This tactic will not work for all parents, however. Only self-employed
business owners can hire their children and avoid payroll taxes. This
includes businesses operated as a partnership provided you and your spouse
are the only partners.
As a result, if your business is incorporated, your
children will be employees of the corporation and not you. Therefore, the
exemption from payroll taxes does not apply and Social Security and
Medicare taxes will be due just as with any other employee.
Remember, if you hire your children, they must be
bona fide employees who actually provide a service to your business.
One additional tax break
whether you are self-employed or own a corporation -- the amounts paid to
your children will be taxed at a lower bracket than yours, assuming the
children have little or no income from other sources.
