Why Paying Your Kids Through Your Business Can Be a Smart Move
As a Trinity business owner, you may have considered hiring your children to help with your business operations. Not only does this teach them responsibility and valuable work skills, but it can also provide significant tax advantages. However, navigating the legal and financial implications requires careful planning. That’s why the best CPA in Trinity is here to guide you through the key do’s and don’ts of paying your children through your business.
Do: Hire Your Children for Legitimate Work
If your children are helping with tasks such as filing, shredding documents, cleaning your office, or managing social media, they can be legally employed. Just like any other employee, they should be doing age-appropriate and necessary work that benefits the business. A Trinity local CPA can help you determine what activities are appropriate and compliant with current labor regulations.
Don’t: Pay Them More Than Market Rate
While it may be tempting to maximize salary payments to leverage tax benefits, overpaying can flag issues with the IRS. Payments should be reasonable and reflect what you would pay a non-relative for the same job. The best accountant in Trinity can help you evaluate fair wage benchmarks to keep everything properly documented.
Do: Take Advantage of Tax Exemptions
If your business is a sole proprietorship or a partnership between you and your spouse, and your children are under 18, their wages may be exempt from FICA taxes (Social Security and Medicare). Additionally, wages paid are deductible business expenses, which can lower your taxable income. Working with a Trinity local CPA ensures you’re maximizing all legal tax benefits available to you.
Don’t: Skip Proper Payroll Procedures
Even though your employees are your children, you must follow standard payroll procedures. This includes maintaining accurate timesheets, issuing paychecks, and filing payroll tax forms like any other employer. The best CPA in Trinity can handle all payroll administration tasks to ensure full tax compliance and peace of mind.
Do: Open a Roth IRA or Savings Account for Your Kids
If your children have earned income from working in your business, you can contribute to a Roth IRA on their behalf. Starting early can give them a significant financial head start. A Trinity local CPA can advise you on tax-efficient ways to build financial literacy and wealth for your kids.
Don’t: Mix Personal and Business Finances
Always keep business payments to your children separate from personal finances. Paying through business accounts and keeping meticulous records helps substantiate that the employment is legitimate. The best accountant in Trinity can set up your chart of accounts and bookkeeping systems to prevent any potential red flags with the IRS.
Work with the Best CPA in Trinity for Peace of Mind
Paying your kids through your business can offer benefits to both your family and your company, but only if done correctly. Albert CPA—the best accountant in Trinity—is here to make it easy and compliant. Whether you need help with payroll, bookkeeping, or sales and income tax planning, we’ve got you covered.
Don’t take chances with your business finances. Let a trusted Trinity local CPA help you put smart, legal systems in place to benefit your business and your family’s future.
