Hiring your children to work in your business can be a win-win situation for everyone. Your kids will earn money, gain real-life experience in the workplace, and learn what you do every day. And you will reap a few tax benefits in the process. The following guidelines will help you determine if the arrangement will work in your situation.• Make sure your child works a real job that he or she can reasonably handle, no matter how basic or simple. Consider tasks like office filing, packing orders, or customer service.• Treat your child like any other employee. Expect regular hours and appropriate behavior. If you are lenient with your child, you risk upsetting other employees.• To avoid questions from the IRS, make sure the pay is reasonable for the duties performed. It’s not a bad idea to prepare a written job description for your files. Include a W-2 at year-end.• Record hours worked just as you would for any employee. If possible, pay your child using the normal payroll system and procedures your other employees use.• Hiring your children works best if you are a sole proprietor. It has additional tax benefits not available if your business is organized as a C corporation or an S corporation.If you have questions, give us a call. Together we can determine if hiring your child is the right course of action for your business and your family.
