Did you know that you, as a sole proprietorship, can write off $5350 of your income each year, for each of your minor children you employ? And you do not even have to withhold taxes from them, and they will not owe any tax on that income, either.
Let's say you have three children under the age of 18, and you hire each to work for you. You can pay each one up to $5350/year, and write off the entire $16,050 from your income taxes. More important, any child earning up to, but not more than $5350 per year does not have to file or pay taxes on the income. So, that money is completely tax free!
But there's more. You can put at least $2000 (or more) of each child's income into a ROTH IRA each year. Why? Because with a ROTH, the funds earned are not taxed when the money is withdrawn. Since the child paid no tax on the income placed into the ROTH, and pays none coming out, the child's IRA will grow much faster, and without any tax at all.
As for the remainder of each child's income (about $3000), you could allow the child a nice weekly allowance while putting the rest away for his/her college education. And if you cannot afford that much pay out of your own income, then you can have the child use some of their income to buy their own clothes, etc. - items you would have had to buy, anyway.
NOTE: if you have three children and you are in the 28% tax bracket, the write-off on this income automatically saves you $4,494 on your taxes. Money in your pocket.
BJ
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