Do you employ your children to work in your business?
This can be a very smart move for several tax-related reasons. But be warned.
When junior goes to work for you, you’d better have answers ready to pointed questions asked by the Department of Labor (DOL) and/or the IRS.
For example, a DOL auditor might question your claim and decide it’s illegal for you to employ your child.
What’s going on here? Why the problem with the auditors. You’ll find out when you read my new article titled Tax Tips: Auditor Claims It’s Illegal for Parent to Employ His 11-Year-Old.
Three ways our fact-filled article can help you:
- We’ll explain the applicable labor laws. The employment of children by parents is governed by the Fair Labor Standards Act. It was passed to protect workers from abuses and ensure that children were kept safe and treated fairly. How does all this affect you? We’ll explain the law in easy-to-understand language when you read the full article.
- You’ll learn what the IRS has to say about child employment. The age of your child doesn’t matter to Uncle Sam. This was determined by the Eller case. The Ellers’ children were ages 7, 11, and 12. Ultimately, the IRS acquiesced and issued two important rulings regarding child employment. You’ll find out what they are when you read the full article.
- You’ll learn how much you can legitimately pay your child. This one is pretty simple. You have to prove that the money you’re paying your child is reasonable for the services they actually render. This seems fair. It doesn’t seem right to pay an eight-year-old $225-an-hour for stuffing envelopes. You’ll get full details when you read the full article.