The truth about your child working for you...

Generational wealth is everyone’s favorite topic of discussion lately and that is AWESOME!!!! However, you have to be careful about the advice you take on social media and from so-called experts. One of the most common forms of bad advice I hear often is “hire your child and just pay them”. It’s bad advice because it’s incomplete advice. If you are going to put your child on payroll, your child must actually WORK.

Before we tackle the technical stuff let’s talk about the kind of work you can have your child do. I think the obvious one in this day and age is have your child manage the social media accounts for your business. The obvious caveat being the maturity of your child, because you do not want your child responding to anything in a manner that would negatively reflect upon the company. That aside no one knows social media better than this generation, so let them do what they do best. They can be the youthful voice and ensure an online presence for your company. This would also ensure that they are bonafide employees of the company and not just on the payroll for the sake of skirting certain laws.

Payments made to a child under 18 who works for his/her/their parent in a business are not subject to social security and Medicare taxes, if the business is a sole proprietorship or a partnership where each partner is a parent of the child-employee. Another great benefit that should be exploited is beginning a retirement account for your child-employee. If your child has earned income then you can open a Roth IRA for minors, which is a custodial account. A custodial account just means that the parent/guardian is in charge of the account until the minor reaches 18 years old. The earlier a Roth IRA is set up for your child, the more tax free compound growth their accounts will have. Imagine if you had begun saving for retirement in your teens-how much closer would you be to actually retiring?!?!

This blog is for general information and education purposes only.

It is not offered as legal advice or legal opinion.

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