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Subject:  Re: Paying children to work Date:  7/14/1999  9:55 PM
Author:  TMFTaxes Number:  17326 of 127613

[[I have a client who wants to pay his minor children(10,13) a paycheck for actual
work performed in his retail store rather than pay them out of his pocket at his
tax rate. Is this generally ok? ]]

Not only is it might want to recommend it to ALL of your Sch C clients (it doesn't work as well with corporations and/or partnerships). The kids have to perform actual work, and the compensation must be in line with the work performed. But it is a great way to get the kids non-taxable (in many cases) income. And fund the kids IRA...either traditional or Roth...and reduce dad's SE taxes and Sch C profit all at the same time.

[[It is a proprietorship by the way. Also, if the
children then have earned income, could they contribute to a Roth IRA?]]

Certainly. You might want to read more about this in my post on the issue in the taxes FAQ area. The post is entitled "Putting Jr. on the Payroll". I think that you'll find it interesting and right on point.

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