Ever thought of the perks of employing your child in your business? Not only will you be able to spend more time with them, you’ll be able to prepare them for the real-world.  Moreover, hiring your kid in your company will make it easier for you to pull in the reigns should they ever mess up.

While employing your child is a great way to subtly introduce them to the harsh reality of practical life, it can also benefit you greatly when it comes to tax returns.

Here are a few ways employing your child in your small business can benefit you in terms of tax returns.

What Kind Of Businesses Benefit From Employing Their Children?

Not all types of businesses can take advantage of employing their children—especially not if it’s a partnership or a corporation.

Moreover, you can’t get tax benefits from employing your children if they’re 21 years of age or older.

However, the business owners that do get tax benefits by employing their child who is under 21 years and of age and according to Form 1040 belong to:

• Sole proprietorships
• Spousal partnerships
• LLCs that are either sole or spousal partnerships

Benefits Of Hiring Your Child In Your Small Business

If your business operates as a sole proprietorship, a spousal partnership, or an LLC treated like either of these, you can save taxes on your child’s salaries if they’re under 21.

If you’re fulfilling the aforementioned conditions, your child’s salaries can be exempted from:

• Social security taxes
• Medicare taxes
• Federal unemployment taxes (FUTA)

However, you’ll need to pay the taxes for Medicare and Social Security once your child turns 18, while the FUTA remains exempted until they’re 21.

Moreover, your child’s salary will be deducted as an expense, which will significantly reduce the taxable income.

How To Hire Your Child In Your Small Business In Accordance With IRS Regulations

The IRS is aware of the fact that employing their children can benefit business owners greatly and therefore, keeps a strict track of employee payrolls. However, here are a few tips you can follow to prevent IRS penalties.

Check The State’s Regulations For Employment

Under many state’s regulations, you can’t employ children under the age of seven. Your child has to be an active part of your company and must fulfill the age threshold. Make sure to check with your states regulations for employment before employing your kid in your business.

Adequate Remuneration

In order to get all the tax benefits, your child must be working enough for the amount of salary they’re getting. You can’t employ your child to sit around all day and then pay them a hefty amount for it.

Follow All Legal Rules

• Hire your child like all other employees
• Manage Form 1-9for employee verification
• Get them a number for Social Security
• Take care of filing the W-2 and W-4 forms

Sounds like too much to handle? We can help!

At A&B Accounting and Business Solutions we take care of all your tax filings with accuracy to prevent penalties from the IRS and provide professional accounting and taxation services. If you’re looking for outsourcing your business’s tax services in Boca Raton FL, contact us and one of our representatives will get started with your case in no time.