Stop giving your kids an allowance if you have a business!
Parents who have a small business are increasing their wealth with this little-known technique - puting their own kids on the payroll.
Whether you are a single parent - divorced or widowed Mom or Dad, or a married couple ... if you have a small business you have a unique opportunity to use your business to put your child or children ages 7 to 18 on your payroll, take a big deduction off your taxes, and increase your net worth as well as your kids net worth.
Why would you want to put your kids on the payroll? In addition to being able to deduct their salary which reduces your taxable income, each child will not have to pay taxes on their earned income up to $5,800 in 2011. If your business is not incorporated you can also eliminate unemployment (social security taxes too. For example: When Mom puts her 15 year old daughter on the payroll, she saves $2,030.00 (in a 35% TB - 35% of $5,800) in income taxes with no cost to her daughter. Then the daughter keeps her $5,800 tax free which can be put into her own bank account for private school, college, tutoring, lessons for singing or dancing, and more.
Want to shelter more money? Mom can save an additional $1,750 in taxes when she sets up an IRA for her daughter with a $5,000 contribution.
Why this work so well for parents and kids. It's a WIN-WIN. By putting your kids on the payroll it's personally rewarding to you and your children. You save money on your taxes, your children learn responsibilities by doing real work in your business, and the money you pay them can be used for their benefit instead of giving them an after-tax allowance. Children get a boost in self-esteem with this increased responsibility, independence, accomplishment and success.
Hiring your children can yield excellent rewards for the entire family. However, it is critical that you understand and follow the rules. There are stringent federal and state laws; however a family business can reap tremendous tax advantages from putting their kids on the payroll. It doesn't get much sweeter than this!
Say you don't have a business? Turn your hobby into a business. Reinvent Your Wealth!
It's time to rethink how we give our kids money. Be a role model for your kids. Involve them with finances now.
Note: Please do not set up tax strategies without proper tax counsel from a qualified tax advisor. It is necessary to coordinate all of your financial issues to make sure you are making the right moves. Tax planning cannot be done in a vacuum. You must tie together all of the pieces of the puzzle!)
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