Monday, July 13, 2009

Hiring Your Children

Q My wife and I are sole proprietors of a small business. Is it true that we get a tax break if we hire our own children?

A Yes, it is. No Social Security tax is due when sole proprietors or husband-wife partnerships hire their under-age-18 kids. And Federal unemployment tax isn’t owed on the kids’ pay until they reach 21. The children must actually work and perform services for the business.
Be aware, however, that your children’s’ unearned income may become taxable at your marginal tax rate if their unearned income is above $1,800.