Hire your Children

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Hiring your child for the summer Is your teenager looking for a job for the summer? Hiring him or her to work in your business not only provides a little income for your child, but it can result in several tax and financial benefits. For starters, wages your child earns are tax-free up to the standard deduction amount of $6,350 in 2017. Furthermore, any excess is generally taxed at just 10 percent. In comparison, additional amounts you receive from your business as compensation are taxed at your top marginal tax rate — which could be as high as 39.6% — while dividends are generally taxable at 15 or 20 percent if you're in the top tax bracket. Under the "kiddie tax" rule, unearned income above $2,100 received in 2017 by a child under age 19, or a full-time student under age 24, is taxed at the parents' top tax rate. But wages aren't treated as unearned income, so there are no kiddie tax concerns here. If your child is under age 18 and works for your unincorporated business, the earnings are exempt from FICA tax. An exemption also applies to Federal unemployment tax up until the age of 21. This creates tax savings when the parent employing the child is self-employed or in a partnership. Your child may also benefit from fringe benefits such as an employer-provided 401(k) or other qualified retirement plan. Similarly, he or she may contribute to an IRA on a deductible basis in combination with or instead of the company plan. Finally, the wages paid to your child are deductible by your business – just like they are for every other employee. Of course, this arrangement might put a strain on family relations, so factor the personal aspects, as well the tax breaks, into the equation Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.