What’s the Best Way to Hire Your Kids?

Hiring your kids is a great way to introduce them to your work, and allow them to earn their own money, and it’s, primarily, a good idea. While there are regulations surrounding hiring your kids, ultimately it’s up to you to determine whether you want to go through with it. A general rule of thumb is that hiring your kids should only happen when they are actually old enough to contribute. 

Although there are many benefits for your business and your child, there are also plenty of risks associated with hiring your kids. Some involve ensuring you follow child labor laws and maintain your parent-child relationship. Others include risks associated with taxes and with possible lawsuits. 

Either way, let’s cover the benefits of hiring your kids (and the best way to do so):

Tax Benefits When Hiring Your Kids

To fully understand the benefits of hiring your kids under the age of 18, consult with your CPA. What we can cover is the possible tax benefits when hiring your kids. To qualify for tax benefits, you will need to track your child’s work, wages, and employment records as if they were a regular employee and not a family member. Forms such as form I9 and W-4 should be completed like other employees. This also covers paying your kids via check, not cash.

Tax benefits may include:

• Deducting your child’s wages or salary on your business tax return as a business expense.
• If your business is a single-member LLC or sole proprietorship that pays taxes like a sole proprietorship, you don’t have to pay payroll taxes or withholding for your child is under the age of 18.
• Your children will have a tax-free wage of the standard deduction.

What’s the Best Way to Hire Your Kids?

First, ensure that you’re following the child labor laws. This means paying attention to age restrictions, the hours your child is working, and the occupation you’re giving your child/your child. It’s likely that’ll you’ll need to check in on child labor laws yearly to ensure that their age does not majorly change their position/job duties/hours. 

Next, you’ll want to ensure that everything is set up legally. You’ll need to fill out the appropriate paperwork, and assign actual duties and responsibilities along with a reasonable wage for said duties. Track hours and job details as they change over time, recording the details will assist in clarifying if any issues DO arise. 

Finally, look at the family dynamic and weigh the pros and cons of hiring your kids. Look at what they need in addition to what you are attempting to achieve. Do they want to work with/for you? Do they understand the benefits? Do they understand their duties/requirements?

Of course, what works best for one family and business may not work for another so it’s important to consider the “what happens next” aspect of hiring your kids. If you’re thinking about hiring your kids, but are not sure what step to take next, reach out to the ModVentures team for a consultation.