Hiring Your Children Can Be Beneficial

I often advise my business clients who are sole proprietors to consider hiring their child who are under the age of 18. If your business is a proprietorship, you pay no payroll taxes on your (under 18 year old) child's wages. Moreover, if your child files as a single taxpayer status, and earns less than $5,700.00 during tax year 2010, your child will pay zero income taxes.

I strongly suggest you pay your child the minimum wage for your state. Also, make sure to keep accurate time sheets reflecting the hours worked as well as copies of the paychecks issued to your child. Should you ever be audited by the IRS, these records will be necessary to prove that you paid your child appropriately and these records will save you a great deal of potential grief.