How It Works
When you hire your children to work in your family business, you can deduct their wages as a business expense. If your child is under 18 and works for a sole proprietorship or single-member LLC owned by a parent, their wages are exempt from Social Security and Medicare taxes. The child can then contribute to a Roth IRA, creating tax-free wealth for their future.
Who Qualifies
- Sole proprietors and single-member LLCs
- Children must perform legitimate work
- Best for children ages 7-17
- Parents must own the business
Key Requirements
- Child must perform real, age-appropriate work
- Wages must be reasonable for work performed
- Keep time records and job descriptions
- Pay via check or direct deposit (not cash)
Documentation Needed
W-4 and I-9 forms, time sheets, job description, pay stubs, proof of payment, description of work performed.