Can employing your children at your business benefit you when it comes time to file your taxes? Thanks to recent changes in tax law, you can’t claim your child as a personal exemption anymore. However, it is still possible to enjoy tax benefits from employing your children. Here’s what you need to know about taking advantage of this opportunity.
Employing Your Children at Your Self-Employed Business
You are considered exempt from the FICA tax if you employ your children, as long as they are under the age of 18. Now, suppose your children’s wages fall under the standard deduction, so they are not taxable. You’ll then claim those as deductible, and you’ll enjoy savings on your income taxes as well as your self-employment taxes.
Employing Your Children at Other Types of Businesses
If you have an S or C corporation, then you will not be able to claim your children as exempt from payroll taxes when reporting at the end of the year. You also won’t be able to qualify if you employ your children who are over the age of 21. If you operate as an S corporation, however, employing your children does stand to potentially save you money. After all, your children won’t pay any income taxes. Thus, employing your children can reduce the total amount of tax liability for your family.
If you’re in need of help preparing your taxes, then it’s time to contact The Royce CPA Firm. Our tax preparation and bookkeeping services are fast, accurate, and professional. To schedule an appointment, contact us today at our Tucson office.