Hiring your teenagers to save on taxes

You are supposed to claim your dependents' income. So it sounds like a nice deal, it probably won't help.

 

not as far as I know.
But if you DO hire them you’re on the hook for 15.something % in payroll tax, which sours the scheme a good bit. Plus any other required crapola such as workman’s comp, etc.

 

Smart**** that's what may neighbor does, he hires his sons who are 23 to do work in his shop, they pay rent and pays them $1100 which works out for taxes on a 1099,

 

That depends on how your business is structured. If you are the sole owner or both parents form a partnership and the child is under18, you do not need to deduct from their pay or, pay the employer contribution for SS or Medicare payroll tax.

If you are incorporated or have a partner other than your spouse or the child turns 18, then you do. When the child turns 21 you have to pay the federal unemployment tax. Workman’s comp I’m not sure of, but it would go under a state’s laws. Many states have a number of employees required (Usually 3-5) before WC is mandatory.

 

Thank you for the detailed clarification. I hate being “somewhat right”.

 

I’d they work, pay them. If not, don’t.