"I have a way you can avoid paying taxes on part of your household income and get more work done in your business. Are you interested in hearing about it?"
Those are two sentences most of our business clients would love to hear. You may be able to e-mail those two sentences to your client after reading this article. Who wouldn't want a way to be more efficient and reduce their tax liability?
Have you had clients calling you to ask if they can save $12,000 by hiring their child? My favorite is, "I heard I can pay my child tax-free. Is that true?" I have received the call and e-mail quite a few times. There has been an uptick since 2018. The misinformation makes me cringe, but the strategy makes me smile.
So today we are going to look at the strategy and answer these questions:
● How much can a taxpayer pay their child and neither one pays Federal income tax?
● Which business entities does this strategy work with?
● How can a business avoid paying payroll taxes when hiring their child?