New York, NY · Member since 2013 · 54 posts · 7 votes
I read that I can hire my children to work at my home base business, which is an LLC. We live in NYC, but our LLC is filed in NC.
Question: If I hire my 11 year old as an employee to do of course reasonable work for a reasonable wage, do I have to with hold taxes and if so which state to I do file his employment NYC or NC?
Thank you
Real Estate Investor · Sun Prairie, WI · Member since 2014 · 68 posts · 100 votes
12y
Do you have a website? Do you have your family's pictures on it? There actually is NO AGE LIMIT for paying your children. There is a limit as to what you can pay them for services performed. You would be hard pressed to justify $5,950 in income to a two year old for appearing on a website. It is possible, however, to contact an advertising agency to find out how much child models receive, then pay your kids accordingly. So if Johnny Jones receives $X for appearing in a newspaper ad, or on a website in his romper, then your child can get paid that too. Bear in mind also that ALL child labor laws apply, so you can't have your 10 year old hauling bales of shingles up on the roof. Similarly, the services have to be legitimate: light-leaver-onner and toy-strewer will not fly.
So, in short, you can pay your child whatever is reasonable and standard for the services performed, and those services must be legitimate and fall within the guidelines as laid out by state and federal child labor laws. If both parents are partners and employ the child, there is an additional savings on FICA and Federal Unemployment Tax (FUTA).
Here's an extreme example. A couple films the delivery of their last child. For training purposes they sell the tape to the hospital, to a couple of midwives, to the local Lamaze teacher, and to a couple of clinics. They ascribe the income to the child, who, after all, starred in the film. Legitimate income? You bet! Age? Still glistening.
Find a creative accountant who thinks as far outside the box as you do, and start saving on all those taxes.
Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
12y
Hi Dana,
I don't have the exact answers you are looking for but I listen to the podcast of an attorney and CPA who discusses this topic often. I do know that you do not have to withhold taxes up to a certain amount but I don't recall what that amount is off the top of my head.
The guy I listen to is Mark Kohler and again he has a free podcast. Every 4-6 weeks he does an "open forum" show where you can call in or email in your questions. If someone on BP can't answer this question for you I would suggest subscribing to the podcast and taking a listen. I think he may have even done an entire show one week on this topic.
Real Estate Investor · Sun Prairie, WI · Member since 2014 · 68 posts · 100 votes
12y
Mark is an excellent resource. His webcasts are usually an open forum, so although he may have a topic or two he's going to cover, he'll also open up his line for questions from the field. As a matter of fact, here's a link to a webcast that addresses your question.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
12y
In answer to this if your kids are less then 18 you can have them fill out as exempt for deductions. you need to file all the forms with the SSA w-2 and w-3 as well as I think a 944. As an LLC you can do this online for the W-2/w-3.
Here is what the IRS says http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Family-Help about taxes you don't have to pay for minor children.
What state?, the state of the employee 's residence. My company withholds based on my residence and they are in another state, I am not sure why this situation would be any different. oh and pay them by check, document hours.
Note I am not a cpa or anything just a parent who has been there.
Accountant · Houston / Katy, TX · Member since 2014 · 35 posts · 10 votes
12y
@Colleen F. hit it on the head as far as Federal is concerned. But @Dana Nicholson, watch out for New York employment law. I'm not intimately familiar with NY law; it just has a reputation of being much more tightly regulated than other states.
A quick search pulled up the following article, which seems to indicate your son may be too young to employ in an office until he is 14, but that is hardly the final word on the matter. I would recommend you talk to a CPA or attorney familiar with NY Employment Law
I'm an accountant, but I'm not YOUR accountant. This post is for general informational purposes and is not a substitute for professional advice from a CPA or attorney familiar with your situation. By using this information, you agree to limit my liability to what you paid for it (that's $0, btw). Have a nice day.
Accountant · Houston / Katy, TX · Member since 2014 · 35 posts · 10 votes
12y
@George P. You can put them to work, you just can't pay them wages. You (and your spouse, if you have one) can each give them (or anyone else, for that matter) gifts up to $14,000 in 2014 without having to file a gift tax return.
@Colleen F. Yes, they are disclaimers and it's a sad commentary that I have to include them to avoid danger to my license. You'd think it would be understood that when an accountant or attorney speaks in a forum such as this, that they are making general statements and not specific advice, but licenses have been revoked for such things. I'd love to live in a world where accountants didn't have privileged knowledge, but rather a way of thinking and analyzing that adds value, but even with the Internet, we're not there yet.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
12y
@Rob K. you can just pay cash but you can't deduct that as an expense then. For me this was a 17 year old and it helped his taxes as with wages he could also have an IRA. Besides because of his age and he is my child he would not pay many of the added employment taxes.
@George P. your children can work for you at a younger age then a regular job at least in my state. (2 would be a little too young). 11 is fine here but could be different elsewhere depends on whether it is reasonable to expect they could do what you pay them for.
yes it is a sad commentary, I often wish we had some common sense doctrine for these type of things. Advice on the internet shouldn't have any expectation of being something you can take to the bank just information to weigh with all the other information you receive.
Real Estate Investor · Sun Prairie, WI · Member since 2014 · 68 posts · 100 votes
12y
Do you have a website? Do you have your family's pictures on it? There actually is NO AGE LIMIT for paying your children. There is a limit as to what you can pay them for services performed. You would be hard pressed to justify $5,950 in income to a two year old for appearing on a website. It is possible, however, to contact an advertising agency to find out how much child models receive, then pay your kids accordingly. So if Johnny Jones receives $X for appearing in a newspaper ad, or on a website in his romper, then your child can get paid that too. Bear in mind also that ALL child labor laws apply, so you can't have your 10 year old hauling bales of shingles up on the roof. Similarly, the services have to be legitimate: light-leaver-onner and toy-strewer will not fly.
So, in short, you can pay your child whatever is reasonable and standard for the services performed, and those services must be legitimate and fall within the guidelines as laid out by state and federal child labor laws. If both parents are partners and employ the child, there is an additional savings on FICA and Federal Unemployment Tax (FUTA).
Here's an extreme example. A couple films the delivery of their last child. For training purposes they sell the tape to the hospital, to a couple of midwives, to the local Lamaze teacher, and to a couple of clinics. They ascribe the income to the child, who, after all, starred in the film. Legitimate income? You bet! Age? Still glistening.
Find a creative accountant who thinks as far outside the box as you do, and start saving on all those taxes.