This is a YouTube video titled "How to Hire Your Kids for Taxes the Right Way" created in December 2023. The content is an informational talk or podcast episode providing guidance on the rules and best practices for hiring children as employees to maximize tax deductions, including legitimate work, reasonable pay, record keeping, and business relevance. It includes a disclaimer noting that the hosts are not licensed financial professionals and the content is for informational purposes only.
If you're interested in hiring your child as an employee, there are specific rules you'll need to follow to ensure you get all the possible deductions. Number one Hire for legitimate work. A good rule to follow is that if they're not doing tasks a non relative would be considered an employee for doing, they likely don't qualify as an employee. The work they do needs to be something an average employee would do, though it doesn't need to be beyond a child's or teenager's abilities. Their tasks should be standard, helpful, and routine for your business. 2. Reasonable pay. Tax incentives encourage parents to transfer as much money as possible to their kids, but the IRS knows this and is watching for it. Don't try paying your kid $1,000 an hour to sort files. 3. Keep payment records. Use direct deposit or a check given at regular intervals. Paying your child in cash may arouse suspicion as it's harder to track. Keeping a timesheet listing the hours your child worked and their specific tasks will streamline your interactions with the IRS. 4. No personal services. You can't pay your child for personal services. Their wages must be paid in exchange for work done in a business setting. Paying your child to make smoothies wouldn't be deductible from your business income unless you run a smoothie business. As a medical professional, something related to your work or office is the easiest to prove to the IRS should you ever encounter an audit on this topic.
The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.
