My husband runs a private practice and gets paid through 1099. We’re thinking about hiring our kids to help with simple tasks like cleaning the office and sorting papers.
Here’s what I’m wondering:
How do we document everything in case the IRS audits us? We’ve been paying them cash weekly, but I’m now thinking maybe we should have used checks. Is it too late to start doing that? Do we need to open a separate account just for this, or can we keep paying from our personal account?
I know we can pay them up to the standard deduction amount without them having to pay taxes, and we can deduct that from the practice’s income. My husband also wants to start an IRA for them. Should we go with a traditional IRA or Roth IRA? Which one would be better for deducting more from the practice’s income?
We’re paying them about $200 a week for cleaning the office 1-2 hours a day, 5-7 days a week. And yes, they’re under 6, but they do a decent job. I don’t get why people question the work just because of their age. We’re just trying to help them save for the future and reduce our tax burden. It’s nothing shady. If anyone finds this offensive, that’s not my intention.
I’m not asking for opinions on whether we should hire them or not. I just want advice on what documents we need. Please be respectful. We all have different backgrounds, and you don’t know how we were raised. We believe in teaching kids to work for what they want.
You can hire your kids as employees, and if they earn less than the standard deduction, there won’t be any income or employment tax owed.
Whether the IRS accepts it depends on whether the return is audited. If it passes without review, you’re fine. If they do review it, it’s unlikely they’ll believe you paid that much to a 6-year-old for cleaning.
Amar said: @Ash
I think $200-$300 a week is fair, right?
What could you do at age 6 that was worth $6 an hour?
At that age, I cleaned the whole house—kitchen, vacuuming, dishes, bathrooms, laundry. My parents taught us to work for what we want. Maybe that’s not how you were raised, but it’s how I grew up.
@Amar
Would you pay an unrelated person the same amount to do the same job as your under-6 kids? Honestly, this sounds like a recipe for an audit, and if they dig deeper, they might question other things too.