This is the next post in my independent consulting series, specifically dealing with business expenses that might help reduce your taxable income.
Hiring Your Kids
This is cool if you have kids. You can actually hire your kids to do odd jobs for your business (the jobs must be legitimate), pay them a decent wage, and save some money on taxes that you would have likely given them for an allowance anyway. The IRS says that you must withhold income taxes on your child's pay only if it exceeds the standard deduction for the year (about $5000). Employment taxes (SS and Medicare) does not have to be paid *if* your business is not incorporated (yes, LLCs taxed as S Corps are fine here). Just make sure you pay your kid less than this amount and you are fine. Not only is the money tax-free for your kid but it is also a deductible business expense if the child's work is business-related. Slight rub...if you pay your kid more than about $600 during the year you must file a W-2 reporting the earnings to the IRS. It's also best to submit a W-4 signed by your kid to the IRS, or at least keep it on file.
Your kids can't just clean the toilets, but light clerical work should be OK.
Every situation is different. My wife is a stay-at-home mom but pretty much has the same skill set I have. It's possible my LLC could find additional contract work that she could handle. If so she could become an employee as well. Then I could open a [[SIMPLE IRAs|SIMPLE IRA]] for her, with the employer match, which would further limit taxes.
Next up...[[SIMPLE IRAs]]