Hiring my underage daughter - paying from business account

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Hiring my underage daughter - paying from business account

Heath M.
Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes

My daughter is 11 and I routinely have her with me while I'm stopping by my rental.  Problem is I'm running out of ideas on jobs I can say she's hired to do.  Looking for ideas and thoughts from anyone who's done it.  

Basically so far she's picked up rocks, held the flash light, ran back in forth from the tool bag, etc.  Mostly looking bored and ready to go home...lol  She's at least been a trooper during showings and clean up/maintenance activities.  

My goal is to pay her a "wage" every month by check from my business account. Then I can set her up a bank account and an investment account. Main goal is so she can roll all that money into a Roth IRA at a very young age. I'll have to have her file taxes this year but that's well worth it in my opinion. I figure this will at least set her up for the future and maybe, just maybe will get her interested in wealth building at a young age.

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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
7y
Originally posted by @Heath M.:

My daughter is 11 and I routinely have her with me while I'm stopping by my rental.  Problem is I'm running out of ideas on jobs I can say she's hired to do.  Looking for ideas and thoughts from anyone who's done it.  

Basically so far she's picked up rocks, held the flash light, ran back in forth from the tool bag, etc.  Mostly looking bored and ready to go home...lol  She's at least been a trooper during showings and clean up/maintenance activities.  

My goal is to pay her a "wage" every month by check from my business account. Then I can set her up a bank account and an investment account. Main goal is so she can roll all that money into a Roth IRA at a very young age. I'll have to have her file taxes this year but that's well worth it in my opinion. I figure this will at least set her up for the future and maybe, just maybe will get her interested in wealth building at a young age.

 If done right you don't have to file her taxes. 


Talk to your tax pro to make sure you're doing this correctly. 

But essneitally she can make up to the standard deduction before a filing would be required- so you could potentially pay her up to $12k with no tax return. More if you also fund an IRA.

However- you need to pay her what you would pay a stranger to do the same job. You can't say you're paying her $25 an hour to move rocks. You could get a laborer at minimum wage for that. 

So at long as you're paying her a justifyable wage, for reasonable hours it's a great idea. 

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  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    7y

    While I think it's good to teach a kid the value of a dollar and work ethic, I don't think that the govt will let you employee a 11 year old. I think in my state the youngest you can legally get a job is 13 and there's a lot of restrictions on hours they can work and mandatory breaks. Maybe the best thing to do is to give her a little cash and start a savings account or some sort of ira. 

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  • Heath M.
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
    7y

    This and a tax book is where I was getting my idea:

    https://www.marketwatch.com/st...

    And it will not be much, basically per job.  And I highly doubt it'll be over $100 a month unless there's a lot of work going on.

    2Reply
  • Douglas Drost
    Member since 2019 · 1 post · 0 votes
    7y

    @Heath M.

    I paid my kids from my rental business, and forwarded the money to their Roth accounts. Want to confer with your CPA on how to document accurately, and make sure the jobs they are doing are age appropriate. Child Slave labor is great in your own business, and generally are exempt from normal employment laws. Highly recommend consulting with an attorney and or state labor offices for clarification.

    Roths are a great alternative to traditional college savings programs.

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  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @George W.:

    While I think it's good to teach a kid the value of a dollar and work ethic, I don't think that the govt will let you employee a 11 year old. I think in my state the youngest you can legally get a job is 13 and there's a lot of restrictions on hours they can work and mandatory breaks. Maybe the best thing to do is to give her a little cash and start a savings account or some sort of ira. 

     Hey George it's actually a super common tax strategy- and most states have an exclusion if it's YOUR children you're hiring. 

    It's essentially  a way to shift income from your 20,30%+ tax bracket to the child's 0%. 


    Kid will need $500 worth of clothes for the year. 

    So you would need to take home $500+ a 20% premium for tax. 

    Instead just have the child earn that $500. 

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  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Heath M.:

    My daughter is 11 and I routinely have her with me while I'm stopping by my rental.  Problem is I'm running out of ideas on jobs I can say she's hired to do.  Looking for ideas and thoughts from anyone who's done it.  

    Basically so far she's picked up rocks, held the flash light, ran back in forth from the tool bag, etc.  Mostly looking bored and ready to go home...lol  She's at least been a trooper during showings and clean up/maintenance activities.  

    My goal is to pay her a "wage" every month by check from my business account. Then I can set her up a bank account and an investment account. Main goal is so she can roll all that money into a Roth IRA at a very young age. I'll have to have her file taxes this year but that's well worth it in my opinion. I figure this will at least set her up for the future and maybe, just maybe will get her interested in wealth building at a young age.

     If done right you don't have to file her taxes. 


    Talk to your tax pro to make sure you're doing this correctly. 

    But essneitally she can make up to the standard deduction before a filing would be required- so you could potentially pay her up to $12k with no tax return. More if you also fund an IRA.

    However- you need to pay her what you would pay a stranger to do the same job. You can't say you're paying her $25 an hour to move rocks. You could get a laborer at minimum wage for that. 

    So at long as you're paying her a justifyable wage, for reasonable hours it's a great idea. 

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  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    7y

    @Heath M.

    Great idea you have getting the tax free accounts(ROTH & CESA) started! Congrats!

    Pay your daughter up to $12k for chores like cleaning the house, rooms, cutting grass, shovel snow, filing, data input/entry, detail the cars, painting, baby sitting, homework, envelope licking, helping you do your chores, social media posts, modeling, etc. no ss or medicare taxes if you pay her personally, as opposed to paying her from your rental company. File a tax return for her so she can show earned income and open a Roth IRA, and CESA. It may affect her FAFSA when she goes to college but at least you have it working until then.

    Verify with your cpa that this works with your particular circumstances. 

    [email protected]215-283-2868
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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    7y
    Originally posted by @Carl Fischer:

    @Heath M.

    Pay your daughter up to $12k for chores like cleaning the house, rooms, cutting grass, shovel snow, filing, data input/entry, detail the cars, painting, baby sitting, homework, envelope licking, helping you do your chores, social media posts, modeling, etc. 

    A little ambitious list for an 11-yo, don't ya think? :)

    2Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Michael Plaks:
    Originally posted by @Carl Fischer:

    @Heath M.

    Pay your daughter up to $12k for chores like cleaning the house, rooms, cutting grass, shovel snow, filing, data input/entry, detail the cars, painting, baby sitting, homework, envelope licking, helping you do your chores, social media posts, modeling, etc. 

    A little ambitious list for an 11-yo, don't ya think? :)

    This. There's no chance an 11 year old can work enough for basically minimum wage to fund $12k + an IRA at this point .

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  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Carl Fischer:

    @Heath M.

    Great idea you have getting the tax free accounts(ROTH & CESA) started! Congrats!

    Pay your daughter up to $12k for chores like cleaning the house, rooms, cutting grass, shovel snow, filing, data input/entry, detail the cars, painting, baby sitting, homework, envelope licking, helping you do your chores, social media posts, modeling, etc. no ss or medicare taxes if you pay her personally, as opposed to paying her from your rental company. File a tax return for her so she can show earned income and open a Roth IRA, and CESA. It may affect her FAFSA when she goes to college but at least you have it working until then.

    Verify with your cpa that this works with your particular circumstances. 

    He needs to be paying her to do business related items- not doing her homework, house chores, ect. 

    He doesn't have to pay her personally- it can also be from his LLC, or if husband and wife are the only partners of a P ship that is allowable as well.

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    0Reply
  • Account Closed
    Real Estate Agent · Cleveland, OH · Member since 2019 · 359 posts · 295 votes
    7y

    @Heath M. Hi, i think thats a fantastic idea! I worked for my parents starting at age 12 (not in real estate, they own retail stores) and it has helped me land jobs, careers, and has taught me to invest, save, and spend carefully. Its a different ball game working for your parents. My friends always thought i had it so easy but my parents disciplined me and showed me how the "real" world works. They even fired me once from a position lol. Definitely set me up for my future. She is very lucky to have this position!

    5Reply
  • Account Closed
    Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes
    7y

    @Heath M. There’s definitely people that talked about doing this on BP and I believe it was discussed on an episode with a CPA a couple years back. People do this for sure. Kids need engagement. My 3 year old daughter thanks me when I give her work or something to carry, even when I don’t need her to do anything. When she gets older she would probably love to get more challenging jobs to do. There’s no reason why you can’t incentivize them for doing something good you’re giving them to develop, and if there’s tax benefits, that’s great because you have to work to keep your kids doing productive things. As a construction inclined guy myself, I’d say keep them away from harmful dusts, or poorly ventilated areas with wet paint and find them things they can clean or trash they can clean up etc. Another good job idea would be taping off things to prep for paint.

    1Reply
  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    7y

    @Account Closed Hey Suny when your parents fired you did you get a severance package?

    1Reply
  • Account Closed
    Real Estate Agent · Cleveland, OH · Member since 2019 · 359 posts · 295 votes
    7y

    @Bjorn Ahlblad hahaha at that age that wouldve been a reward!

    0Reply
  • Heath M.
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
    7y

    Yeah I remember hearing about it on one of the podcasts too. My main issue is I'm running out of ideas for stuff I can put on a record/timesheet. My main goal was just to get enough each year to max out the Roth IRA. That's 6k in 2019 so I need to get on the ball at basically $10 an hour...

    I like the idea of envelopes, I've been meaning to do some mailers.  Any other ideas, keep them coming!  Thanks all.

    0Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    7y

    I started doing exactly that with my 15 year old kids last year. The funded their ROTH IRA at $5.5k last year and this year. They can add $500 more this year, but have not earned that yet.

    For a family owned business, they do not need to pay SS or Medicare, unemployment insurance, etc.  So as long as they are paid under their exemption level they do not need to file taxes at all.  

    The ROTH manager will send the IRS a form that money has been contributed to the ROTH.  That is all you need.

    My kids have a savings account with a small local savings and loan that will, with the parent's signature to ok, allow the kids to manage the account themselves.  They have had it for 2 years, putting in money and taking it out on their own, without my involvement. Good learning experience.

    For the work, it is required that you pay your kids what you would pay another non-relative to do the same job.  Not a child labor rate, nor over paid and clearly an asset transfer.  The IRS can look at this critically, I was told.  We keep records of what they do, post some photos on FACEBOOK of them working so it is well known and findable.

    My kids will demo anything decks, kitchens, carpet, etc.  A younger kid could move out the demoed material and put them in a dumpster or out of the house in a pile.  They spray and pull grass and weeds.  They plant plants.  They mow lawns.  They sweep inside and outside.  They do all types of cleaning from walls and floors and cupboards to light fixtures, stoves and ovens and refrigerators.  They each have assigned properties and file the receipts, and list each receipt into the accounting log. They keep track of mileage to the properties in a log.  They are also learning skills for some fix it items.  Painting, installing vinyl laminate flooring planks, putting on molding and trim, changing out faucets.  

    I do not know your kid, but think that it would be hard to convince the IRS that you would pay someone to hold a flashlight, etc.  Maybe change it around and you teach her how to do the task and you hold the flashlight.  Make her more active and see if she is less bored.  

    As a kid my brothers and I always helped my dad.  We knew that we had learned a skill when we could do it on our own.  We started painting in the closets.  We knew we were doing well when we were asked to paint a real wall, that was not in a closet!  Maybe helping your daughter develop skills would help her feel better about the tagging along.  She definitely could keep your log of mileage and what you do each day, including hours on each real estate task...much more grown up than holding a flashlight and moving rocks.

    5Reply
  • DJ Brey
    Rental Property Investor · Mankato, MN · Member since 2019 · 6 posts · 0 votes
    7y

    @Heath M.

    Check out this YouTube link on the topic. I hope this can help you.

    https://www.youtube.com/watch?v=k-cPTbac3YA&t=24s&app=desktop

    I’m planning on doing this for my kids as well.

    0Reply
  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    7y

    @Michael Plaks

    Haha- Not sure about ambitious most 11 year olds beat me on social media posts and computer work and setting up electronics. The price you pay for the “nerd squad” could easily make you $12k a year.

    I’m old school when kids could do for themselves at an early age. They got their own insurance at 18, paid their bills, got a job, and were helping themselves and the community and had fun along the way. Things are different today it’s hard to hire the neighbor kid to wash a car or pull weeds, setup a lemonade stand,etc. 

    maybe this problem is to hard to solve  and we can’t help @Heath M. JK

    [email protected]215-283-2868
    1Reply
  • Ryan Rippinger
    Flipper/Rehabber · Montgomery, IL · Member since 2014 · 25 posts · 6 votes
    7y

    @Natalie Kolodij

    Could this be done with another family member or is it only applicable to kids. I have a brother in law (14) who helps me out from time to time but I just give him cash

    0Reply
  • Shawn M.
    Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
    7y

    @Heath M.

    Why are you investing in RE? Probably for passive income and time flexibility/lifestyle. Instead of the IRA I'd prefer an account for a future property/business investment for. Your teaching her RE skills and if all goes well she will be buying property when she is 19 and never need the IRA. please don't give the money to Wall Street.

    0Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Ryan Rippinger:

    @Natalie Kolodij

    Could this be done with another family member or is it only applicable to kids. I have a brother in law (14) who helps me out from time to time but I just give him cash

    Only children unfortunately. 

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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Shawn M.:

    @Heath M.

    Why are you investing in RE? Probably for passive income and time flexibility/lifestyle. Instead of the IRA I'd prefer an account for a future property/business investment for. Your teaching her RE skills and if all goes well she will be buying property when she is 19 and never need the IRA. please don't give the money to Wall Street.

    I think you're missing the whole strategy of tax savings now. Plus that can be rolled into a SD IRA to buy houses with, or utilized for college.

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
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  • Heath M.
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
    7y

    @Shawn M., exactly as @Natalie Kolodij said, it's a tax savings for me right now AND as an added bonus a way to ensure she has a good down payment if she wants to get into real estate later. She can use the Self Directed IRA option for that or if not then it'll be a nest egg for her future.

    And I personally have a substantial part of my networth in the market.  For me I feel it is best to diversify, I don't want to have all my eggs in one basket.  At least that's my goal, to each their own.  My plan is to grow my real estate holdings to be on par with my market investments but I'm not stopping my contributions to do it, my real estate holdings are going to have to sprout their own wings and work for it...lol  That way hopefully 1 of them will provide me with a great retirement.

    1Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    7y
    Originally posted by @Ryan Rippinger:

    @Natalie Kolodij

    Could this be done with another family member or is it only applicable to kids. I have a brother in law (14) who helps me out from time to time but I just give him cash

    Not paying SS, unemployment insurance, etc. only works for your immediate family. But do your BIL a favor and W-2 him and pay those taxes, etc so that he can put the money into a ROTH IRA. He probably will not need to file for taxes either, unless he works a lot.

    0Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    7y
    Originally posted by @Natalie Kolodij:
    Originally posted by @Shawn M.@Shawn M.@Shawn M.:

    @Heath M.

    Why are you investing in RE? Probably for passive income and time flexibility/lifestyle. Instead of the IRA I'd prefer an account for a future property/business investment for. Your teaching her RE skills and if all goes well she will be buying property when she is 19 and never need the IRA. please don't give the money to Wall Street.

    I think you're missing the whole strategy of tax savings now. Plus that can be rolled into a SD IRA to buy houses with, or utilized for college.

    That and also, one should diversify. Some money in the bank, some in cds, some in stocks, some in bonds, and yes some in real estate

    0Reply
  • Shawn M.
    Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
    7y

    you all are killing me, Please don't get lost in the tax savings. If you want to set your daughter up, help her buy some property when she is ready. Tax free money in 52 years is useless in making her life better now. 

    She won't be able to use the sdira money to buy a house that she will be able to pour sweat equity into and learn the business with. 

    0Reply
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