children as employees

dletheridge · Apr 7, 2011

Not really for the current tax year, but for the next.

I have a 21 year old daughter that is mildly mentally retarded and is having a very hard time find a job. What I would like to do is be able to hire her as an employee.

I kind of figured out that it would have to be something that is necessary and related to the business.

But, what are the fine print items of doing this? What kind of paperwork would I have to do? Would this situation fall into the fray of me having to pay employment taxes, etc etc etc?

greg334 · Apr 7, 2011

You are stepping into the accountant's world, I would find one, have them explain to you what it takes and what the problems are in doing so. It isn't as cut and dry as many get away with and there are some steps that you have to take - so get real professional help with it.

dletheridge · Apr 7, 2011

I sure hope you don't think i'm that naive.

greg334 · Apr 7, 2011

No not at all, I think it is a great idea that you have and it is a great solution to a problem a few have but the problem that may be a pitfall is payroll taxes and the other federal taxes and how it all works, which a person like an EA or an Accountant who knows how to set this up quickly will help you a lot.

It isn't as simple as many make it out to be with a kid who may be living at home because of some circumstances, like a disability and there may be an issue with say how you present the work relationship to the IRS if you get audited.

So my advice is to get someone who can; 1- represent you with the IRS, 2 - set everything up quickly that is fool proof and 3 - give solid advice on how to get out of it when you need to, like when she gets a job.

Brisco · Apr 7, 2011

This is done by more "Individual Company Owners" than you could even imagine.

Don't know the ins and outs on how to get away with it, but I'll share my past experience with a company I worked for who did just this with the owners 2 kids.

Right when I got out the military back in '88, I went to work for my best friends Father. He was the General Manager of a company that supplied cleaning chemicals and stuff for businesses all over West Texas. Owner had 2 kids. At that time, his oldest son was in the 10th grade, and I believe his daughter was in 7th. One day my best friend and I were hanging out in the bookkeepers office. It was payday, and when we asked for our checks, she just handed us a stack of envelopes and said here, dig for 'em yourself. Well, as we were looking for our checks, we saw 2 checks with the owners son and daughters name on it. (didn't see the amount, they were in envelopes) We joked with XXX about the checks made out to Chad and Carrie, saying they get both an allowance and a paycheck, and all she said was it was really just a small tax write off for the owner.

Well, couple of months later, my best friend just happen to walk by XXX office as she was getting ready to hand the checks out. As he was looking through the stack for his, she walked out of the office for a bit. He took it upon himself to look at Chad and Carries check amount real quick. Learned that both those kids were making almost $40,000 a piece as "Employees" for that company. Dang good tax write-off, IMO.

How long did he get away with it??? Don't know, but probably never had any trouble with the IRS doing it either. Doesn't matter to me today cause that was 23 years ago. ****ed me off back then though cause he just would not pay a decent hourly wage for the job we were doing for him saying it wasn't in the budget while at the same time taking a tax write off like this AND buying those kids every little thing they wanted. Oh well...........

Fkatz · Apr 15, 2011

children as employees

Not really for the current tax year, but for the next.

I have a 21 year old daughter that is mildly mentally retarded and is having a very hard time find a job. What I would like to do is be able to hire her as an employee.

I kind of figured out that it would have to be something that is necessary and related to the business.

But, what are the fine print items of doing this? What kind of paperwork would I have to do? Would this situation fall into the fray of me having to pay employment taxes, etc etc etc?

hi, there are many complicated issues using your dependents as employees.

#1. You would have to pay then as an employee
#2 Pay Poyroll taxes including federal tax you withhold
#3 Pay your half of Medicare and Social Security tax the you with hold from them
#4 Pay for there health care under the new rules of the health care reform
#5 Pay workmens compensation on your total income, not you net.
$6 Make quarterly Tax payments for you payroll tax
#7 If you 21 year old daughter is collecting Social Security Disability or SSI she cannot make over a certain amount of $$$.
8# If you pay your childern more than 5700.00 they would have to file a tax return even though they are under age. it is reportable income
#9 you can hire your 21 year old to do bookkeeping for you but your 7 year old cannot be hired until he is 16 in most states

There is more information on the IRS website, but I cannot find the publication #

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