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Author: eedee Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121162  
Subject: wages for kids Date: 1/13/1999 10:10 AM
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I have a freelance writing business as well as a regular job. I'm not incorporated; I just file a schedule C for my freelance earnings.

I want advice about the following idea: I'd like to put my children on the payroll, pay them $2,000
each per year, and put this money in a Roth IRA for them. I figure this way I save on taxes for the
profit from my business and put some money away for their futures (part of which could help to pay
for college). But how old do they have to be before I employ them? Can a 6-yr-old earn $2,000 and
start an IRA legally? A 12-year-old? If I do pay them, do I also have to pay social security, etc? Do I
need any documentation about what kind of work they perform?

Thanks for any info on this.

--eedee
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8359 of 121162
Subject: Re: wages for kids Date: 1/13/1999 8:32 PM
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[[ I have a freelance writing business as well as a regular job. I'm not incorporated;
I just file a schedule C for my freelance earnings.]]

Good deal...

[[ I want advice about the following idea: I'd like to put my children on the payroll,
pay them $2,000
each per year, and put this money in a Roth IRA for them.]]

Many small business owners, such as yourself, do this very thing. It's not uncommon at all.

[[ I figure this way I
save on taxes for the
profit from my business and put some money away for their futures (part of
which could help to pay
for college).]]

And you are absolutely correct. You'll not only save income taxes, but SE taxes on yourself.

[[ But how old do they have to be before I employ them?]]

Old enough to do a valid job for a reasonable wage. There may be state employment laws that you might have to deal with, but generally, family members are not subject to the minimum wage laws, the child labor laws, etc. But you'll have to check with your state.

[[ Can a
6-yr-old earn $2,000 and
start an IRA legally?]]

I don't see why not. A 6 year old can sweep floor and emply trash cans and do other real work.

[[ A 12-year-old? ]]

Certainly. A 12 year old can even do more advanced things with some supervision. I'm sure that there are things that you can find around your business that both your 6 and 12 year old can do.

[[If I do pay them, do I also have to pay
social security, etc? Do I
need any documentation about what kind of work they perform? ]]

This is all discussed in my post in the Taxes FAQ area called "Putting Jr. on the Payroll". Check it out and it should be explained to you there. Once you read that post, if you have any additional questions, feel free to post 'em here.

[[ Thanks for any info on this.]]

Hope this helps...
TMF Taxes
Roy

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