Hiring Children In The Family Business

Hiring Children in the Family Business David W. Swatosh, CPA Phone: Ext. 7147 Email: david.swatosh@rehmann.com

Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Considerations ,[object Object],[object Object],[object Object],[object Object],[object Object]

Income Shifting ,[object Object],[object Object],[object Object]

Example ,[object Object],[object Object]

Income Shifting ,[object Object],Parents: Child’s Wages $6,000 Tax Rate 33% Tax Savings $1,980 Child: Child’s Wages $6,000 Stand. Deduction ($5,700) Taxable Income $300 Tax Rate 10% Tax Due $30

Kiddie Tax Implications ,[object Object],[object Object],[object Object]

Kiddie Tax Implications ,[object Object],Parents: Child’s Wages $10,000 Loss of Exemption ($3,650) Inc. subject to Kiddie Tax $1,600 Total Inc. from Child $7,950 Tax Rate 33% Tax Savings $2,624 Child: Child’s AGI $13,500 Exemption ($3,650) Stand. Deduction ($5,700) Taxable Income $4,150 Tax Rate 10% Tax Due $415

Retirement Savings ,[object Object],[object Object],[object Object]

IRA Contribution ,[object Object],Parents: Child’s Wages $10,000 Loss of Exemption ($3,650) Inc. subject to Kiddie Tax $1,600 Total Inc. from Child $7,950 Tax Rate 33% Tax Savings $2,624 Child: Child’s AGI $13,500 Exemption ($3,650) IRA Deduction ($5,000) Stand. Deduction ($4,850) Taxable Income $0 Tax Rate 10% Tax Due $0

Education Credits (Sec. 25A) ,[object Object],[object Object],[object Object],[object Object]

Education Credits ,[object Object],Parents: Child’s Wages $10,000 Loss of Exemption ($3,650) Net effect on T.I. $6,350 Tax Rate 33% Tax Savings $2,096 Child: Child’s Wages $10,000 Exemption Stand. Deduction ($3,650) ($5,700) Taxable Income $650 Tax Rate 10% Tax Due $65 AOTC $1,065 Tax Refund $1,000

Payroll Tax Savings ,[object Object],[object Object],[object Object]

Circular 230 ,[object Object],[object Object],[object Object]

Hiring Children In The Family Business

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