Tax Deductions – Hiring Your Kids Part 2
To hire your children and take advantage of the tax benefits, the following rules must be abided by. To find out more in regards to the additional details and regulations regarding child worker tax deductions, contact us at (757) 269-9099. Be sure to check out strivecpa.com and follow us on twitter @strivecpa.
- Age Appropriate and Legitimate Work
Hiring a seventeen year old to answer phones, clean the office, or refill the water cooler is perfectly fine, but putting a seven year old in charge of security will not pass muster.
The job doesn’t have to be vital, merely common, accepted, helpful, and appropriate for your business. While cutting the family lawn doesn’t count, performing yard work at your place of business most certainly does.
Please note; the deductions only apply to your kids who are under the age of 18 and are your dependents. Nieces and nephews, college kids home for the summer, or the neighbor’s children do not qualify.
- Reasonable Compensation
In terms of your taxes, it’s beneficial to pay your kids as much as possible, but you cannot shell out as much cash at you want. Only pay them the same amount you’d pay anyone else for the work performed. Be sure to have your kids fill out a time sheet and always pay by check.
- Legal Requirements
You must own your own business and a W-4, I-9, and Employment Eligibility Verification has to be filled out prior to hiring your children. You must also fill out and file IRS form W-2 showing how much your child has been paid by your business. Lastly, be sure to fill out a job description and an employment agreement for the position.
A better, faster, easier way. 