Updated: Dec 12, 2022
Welcome to Profit First Taxes, we help Coaches and consultants scale upwards with legal tax and accounting strategies. Today I’m going to talk about increasing your deductions by paying your minor children wages.
One of my clients has 4 children ages 1,3,12, and 15, the very first strategy that I helped her implement is….
1st Putting all the kids on payroll-When she came to me, she expressed that the older kids help her with the business, and she pays them cash here and there. and the younger ones are there on occasion, but she never knew she can claim those wages on her taxes as a deduction.
If the wages remain 12k or less there is no taxes to file for them.
No social security
Just 100% tax free money
2nd strategy we helped her with was choosing age appropriate jobs. She wanted to know how can a 1, and 3-year-old legally work and get paid.
Yes, the kids must work for you
And the work must be age appropriate
3rd strategy we helped her with was how to pay her kids the wages even though she’s an S-Corporation.
If you’re an S-Corporation you have to pay taxes like everyone else on the wages to your kids, however there is a legal loophole to get the same tax-free benefits.
By not implementing these strategies you could risk overpaying taxes and leaving deductions on the table.
If you have children and would like to know how you can pay each child up to $12K a year, pay zero taxes on those wages, and deduct those wages on your taxes, even if you’re an S-corporation
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