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Saving Money on Taxes Can Start with Hiring Your Children
Take home pay! What all of us work for, right? Well, what about "keep home pay?" That is what you can create if you hire your children in your business. Not only will they by getting money to work, but it will be from your business so it will stay in the family. In addition, it can provide substantial tax benefits for you and for them now and in the future. So, needing some help in your business? Look first to your children.
Reporting their income is as simple as reporting any other employee you would hire. Payroll Form 941, line 2. You deduct their wages (what you paid them). Then if they earn enough income, either from your business or other sources, to require Federal or State income tax witholding, you will have benefited with a tax deduction for your business for it. And your child has added another source of income. Hey, every little bit helps!
Now, here is where the benefits really add up. If your child is still an exemption on your tax return (translation - Mom and Dad still provide over half of their support) gets to earn $5,350 and not pay any taxes. Also, here's a chance to put away some moolah for their future - you can establish an IRA for your child and put away up to $4,000 per year tax free. That's tax free for your child, and tax deductible for your business as employee expense. You give them a W-2 at the end of the year and do a simple tax return. If you stayed within these guidelines, there should be no taxes due for your child. The great part is that you have saved 15.3% FICA and Medicare taxes on $9,050 from your business by giving it to your child. Net business savings? = $1,385.00. Investing into your child's retirement? = Tax free . Knowing how to do it right? = Priceless!
Debbie "The TAXpert" Cumberland. You may feel free to distribute this article provided you do not change it in any way, and include the author bio and links at the bottom of the article.
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