Minor Child Wages
Published: 8/5/2019 9:39:44 AM
Minor Child Wages
"Putting Your Kids on Payroll Can Save you Money"
If you are a sole proprietor, a partnership consisting of husband and wife, or a single member or husband and wife only member LLC, putting your minor children on the payroll can save you tax dollars. Your children must be able to perform duties in relation to their age, and proper payroll records must be kept, in order to expense these wages to your business. Below is an example of the employee and employer taxes and the amount of savings available.
Standard Deduction - $ 6,350
Federal Taxes - $ 0
State Taxes - $ 0
Social Security - $ 0 Workers Compensation - $ 0
Medicare - $ 0 FUTA - $ 0
S.D.I. - $ 0 SUI - $ 0
Total Employee Tax - $ 0 Total Employer Tax - $ 0
Business Owners are taxed on Net Profit. Since Minor Child Wages are an expense to your business, they reduce Net Profit, thereby eliminating all business taxes on these wages. Here are two examples, one with a minimum tax bracket and one with a middle tax bracket.
Minimum Tax Bracket Middle Tax Bracket
Federal Tax – 10% Federal Tax – 25%
State Tax - 1.25% State Tax - 6.25%
Self-Employment – 15.3% Self-Employment – 15.3%
Total Tax 21.55% Total Tax 46.55%
$6,350 Minor Child Wages $6,350 Minor Child Wages
x 21.55% x 46.55%
$1,368.43 SAVED! $2,955.93 SAVED!
Reference: Circular E – Employer Tax Guide pg. 12, Family Employees
EDD CA Employers Guide pg. 11, Family Employees
or
Information Sheet DE 231TE - Types of Employment pg. 4 Family Employees