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Children as employee

I have a home rental business that's in an LLC. Whenever we acquire new properties or when a tenant moves out I usually have my son go in and help with the cleaning of the unit. I typically would pay him a little bit just out of my own pocket however I was recently informed that I can pay him for his services in the business and he doesn't have to claim that money as income. I think you can pay up to $12,000. Has anyone heard of this? It actually is a legitimate job that he does.

1 Best answer

Accepted Solutions
Hal_Al
Level 15

Children as employee

Q.  Do I just add that W2 to our normal personal taxes? 

A.  No.   You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2021 if he had any of the following:

  1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,550 (2021).
  2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1100.
  3.          Unearned income over $350 and gross income of more than $1100
  4.          Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)
  5.          Other self employment income over $432, including money on a form 1099-NEC

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5 Replies
Hal_Al
Level 15

Children as employee

That's essentially true.

You have to issue your child a W-2.  It' reportable, but as long as his total income is under $12,550 (2021, 12,950 for 2022), it won't be taxed and he doesn't have to file a return. And you business can deduct his wages.

 

Furthermore  you DO NOT have to pay payroll taxes (social security & medicare) for employing your kids, under 18,  if your business is a sole-proprietorship, a single-member LLC taxed as a disregarded entity, or an LLC taxed as a partnership and owned solely by you and your spouse.

 

 

 

 

Children as employee

My kid is 9 years old so do I just add that W2 to our normal personal taxes? 

Hal_Al
Level 15

Children as employee

Q.  Do I just add that W2 to our normal personal taxes? 

A.  No.   You do not report his/her income on your return. If it has to be reported, at all, it goes on his own return. If your dependent child is under age 19 (or under 24 if a full time student), he or she must file a tax return for 2021 if he had any of the following:

  1.          Total income (wages, salaries, taxable scholarship etc.) of more than $12,550 (2021).
  2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1100.
  3.          Unearned income over $350 and gross income of more than $1100
  4.          Household employee income (e.g. baby sitting, lawn mowing) over $2300 ($12,550 if under age 18)
  5.          Other self employment income over $432, including money on a form 1099-NEC

Children as employee

State filing requirements may be lower.  Also, is a 9 year old legally permitted to work in your State?

When Can I Legally Have My Children Work in the Family Business? - HG.org

Children as employee

We live in Tennessee

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