Why your kids are model employee’s?

by | Jan 24, 2019 | Blog | 0 comments

Working with family in a small business environment tends to be either very rewarding or makes for even more awkward holiday gatherings. If you own an S-corp and have children, it has never before been as lucrative to have them work for your company. Many kids have grown up working in the family business, whether it’s on the farm or minding the store after school; although paying them via payroll has mostly been an expensive endeavor. Before the 2017 reform, children could only earn small amounts before they were either subject to income taxes or made their parent’s income taxes worse. Since the standard deduction has been raised to $12,000 for 2018 onward, children are able to work and earn higher wages from the family businesses and generate benefits for their parents.

For 2019, children can earn up to $12,000 in wages that would not be subject to federal income taxes. The business would receive a deduction for the wages paid and the $12,000 would not be taxed at the federal level. Payroll taxes would be due on the $12,000 which on average would work out to be about $170 per month. State income taxes might be due on the earnings depending on the residency of the child. For NC purposes, a child who earns a $12,000 W-2 from their parent’s business generally pays less than $200 to NC for income taxes. If the payroll is kept to $12,000 annually, then the parent’s income savings can be calculated by adding the payroll taxes to the payroll total ($14,000=$12,000+$2,000) and multiplying the amount by the parent’s rate. If the parent’s combined (federal & state) rate is about 30%, then EACH child’s payroll saves the parents $4,200 in total taxes. The icing on the cake is that the child(ren) would also be eligible to make an IRA contribution since they earned wages during the year.

Let GP put your kids to work for a purpose! See the difference an advisor can make for your family business.

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Tina Simmons
Tina Simmons
13:38 17 May 19
This team is dedicated to their clients and committed to understanding your business and sharing their knowledge to help you succeed. I love working with these folks, they take the worry and uncertainty out of and taxes!read more
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Bravo4 Autowerks
12:55 08 May 19
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Queen City Newborn Care
Queen City Newborn Care
15:57 02 Apr 19
I was drowning before I met Justin. He totally transformed how I run my small business and has gotten me organized in ways I didn't even know were possible. I am so grateful for his advice and suggestions! This company is worth every penny.read more
Dennis Bloomberg
Dennis Bloomberg
16:01 26 Mar 19
Unfortunately, I found GMP when my mother passed. She had a trust set up and I had no experience with one. I received excellent advice prior to filing taxes, that allow for the transfer of assets with little tax implication. The tax process was simple for me, Justin took over once he had details and cleared up all question from filing our taxes. Thank you for a job well done!read more
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Natalie Knight
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Ashlyn Lelej
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I highly recommend Justin at Prusiensky, for all of your and tax needs. I've been a client for over two years, and have been consistently impressed with their dedication to helping my business grow and be financially successful. His advice is invaluable. Thank you!read more
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Bobby Nguyen
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My partner and I started our very first small business last year. Justin has been a blessing to us. Being new at all of this, we didn’t understand much of how business taxes work. Justin explained and answer all of questions that we have. He took care of everything for us throughout the year and have made life so much easier for us. I couldn’t have asked for a better CPA. Highly recommended!read more
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