Do you know that you can easily turn your high-taxed returns to the tax-free income?
Hire your family member and save money on taxes!
The tradition of having a family member in the business has been around for years. And it keeps on escalating as more young entrepreneurs are stepping into the world of self-employment.
If you are going to join the family business or stepping into the world of entrepreneurship, you should be aware of legal benefits of tax to earn profits and save more.
This would eventually help to structure your business and help your family member to make proactive tax-efficient benefits.
Putting your family member in your family business would help you:
- Turn high-taxed payroll to the low-taxed income
- Achieve social security
- Helps you invest in retirement plans
Whether it’s a husband-wife partnership or employing your child who is younger than 18, or its employing parents, the tax laws are different for everybody.
Employment for Parents:
If your parents are supporting you in your business, then as per the employment lawyer of Orange County, you can save a significant amount on taxes. Since they’ll be working for your company and will receive wages, there will not be any tax deductions for the business. Even if the parents don’t want the money, they can return to the business as a gift.
Employing the Spouse:
A spouse can contribute in a huge way to any business and can save huge taxes. Since he/she will be dealing with some different administrations and tasks, the business owner will be paying more top them. With spouse, you can either work in a partnership which will also help you reap spouse pension benefits.
As per health reimbursement arrangement which deals in providing medical expenses, tax saving and many benefits only to the employees, if the business is in partnership, the partner or the spouse can have all benefits. This will not only save self-employment taxes but also help in keeping money on marginal taxes.
Another benefit of having a spouse is that she can have advantages of employer-sponsored retirement plan.
Hiring Children Younger than 18:
Dependent children offer greatest tax-saving opportunity. Since the children are not subjected to employment taxes from their wages, proprietors can have them onboard to save money.
This will also help business owner as he doesn’t have to pay federal unemployment taxes or have to share for employment taxes. The child can buy things for business without paying further taxes which otherwise parents have to pay a hefty amount for.
To sum up, the tax benefits while hiring a family member to work can be helpful in the following ways:
Children employed by a family member will not have to pay taxes. He/she is also not responsible for tax deductions in business as well.
Salary given to the children helps in reducing the net income of the business which in turn reduces the amount the parent proprietor pays in self-employment taxes.
From a tax point of view, hiring a family member to help out in the business can be quite beneficial.