This or this which is correct?

What’s the difference between a one time job and paying your kid a salary?

In the last couple of articles we have discussed how schedule C filers can hire their children and under 18 children to avoid paying payroll tax. 11th hour series- Tax strategies for the spouse and kids

This unfortunately is not to same for owners of corporations, as you both get stuck paying payroll tax. (sorry)

However, there is a light at the end of an 18 year tunnel for corporation owners.

Here are strategies on how you can save money and taxes!

Let’s say that you could pay your child approximately $20K in salary:

You deduct the $$20k from your tax bracket.
Your child pays about $1000 in taxes.

That’s what I call a great return on your investment(your investment being not only your business but your child (***enter snicker here***).

Self-Employed net earnings

The tax code says, “The term ‘net earnings from self-employment’ means the gross income derived by an individual from any trade or business carried on by such an individual . . .”

The Supreme Court ruled that to be in a trade or business, you need to be involved with continuity and regularity and that a sporadic activity does not qualify.

What does this actually mean? You have to pay yourself consistently. No more writing yourself a check from the company when you need one!

Shameless Plug: This is where a great bookkeeper can help you get a handle on that. Guess what? We are great bookkeepers!

Strategizing!

So, one time jobs like, building a website or painting your office does not an employee make. Hiring your child to do such jobs does not qualify them as employees, don’t cross the line.

Accordingly, the TCJA a MISC workers (which is what a one time task job is) your child to incur any expenses. itemizing their expenses for deductions can lead to a 2% adjustment on income. (We certainly don’t what that The point is to save on taxes am I right?!?I)

If you need windows installed, your best bet is to have your website built or office painted its best to hire a business to do it.

Bottom line one time jobs are subject to self employment tax.

The law according to congress…

According to the law people… a one time task or job is defined as “one-time’ duh or occasionally. Now here does occasionally and is considered a trade meet. Whelp, it is at about 10. So if you have your child, not only building your website but maintaining it throughout the year, is not a trade but a hirable position.

That tie IRS is looking for is the degree of recurrence, continuity, and availability to be considered a trade. If your child continually maintains your website and is available if problems arise, it is still a great way to pay them a full salary instead of a ‘one-time’ trade job. Saving both of you money and taxes in the process

Still need help understanding what this all means? Contact Us