turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Ask the Experts All About the W-4! >> Event happening NOW!!!
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

astrz
New Member

Paying kids from an LLC - do you need to set up payroll?

I am wondering a few things about paying kids from an LLC: 

 

1. Do you need to set up official payroll for them and issue a W2? (Kids are 13)

 

2. I think you can put their salary directly into an IRA so they have it for education expenses and aren't subject to taxes (we are talking less than $5k per year) - would it make more sense to just fund a 529b directly with that same amount as opposed to paying salary?

 

Thanks! 

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

2 Replies

Paying kids from an LLC - do you need to set up payroll?

You would issue a W-2 but not pay FICA taxes or withholding. You could set up a Roth IRA for the children and contribute an amount no more than their earnings. The 529 plan is a separate issue and not relevant to their employment. 

Paying kids from an LLC - do you need to set up payroll?

If you have employees you must set up payroll and issue a w-2.  However, if they are your children under age 18, you do not need to withhold social security or medicare tax (and the LLC doesn't pay the matching amount).

 

Be aware that you may have to follow other state or federal rules, however.   If you have other employees besides your children, you need to be aware that some employee benefits must be "non-discriminatory" meaning you must offer the same benefits to all similarly situated employees.  For example, you probably can't offer your children a 401k if you don't offer it to your other employees.  And there are some restrictions on employee benefits that can be offered to owners or their family.  And you may have state laws about wages and hours that apply to all employees, even your own children.  (For example, NYS has a law about what information must be provided on a pay check or pay stub, and the fine is $100 per non-compliant check.). 

 

So do some appropriate research.  

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies