Hiring Your Children Can Lower Your Tax Bill

Hiring Your Children Can Lower Your Tax Bill

Hiring your children can lower your payroll tax bill. No FICA tax is due if sole proprietors or husband-wife partnerships hire their kids who are under age 18.  Ditto if the kid works for a parent’s one-person LLC that’s disregarded for tax purposes.  Also, federal unemployment tax is not owed on their salaries until they reach 21.

Although there are tax benefits to hiring your children, keep in mind that you must pay your children a reasonable wage and document evidence of the work performed. You also must file the appropriate paperwork and payroll reports, as with any employee.