domhnaillT[at]hotmail.com (Don Domhnaill) writes:

- quote -

If you are the sole proprietor, there is no partnership
requirement for a married couple. You may hire your wife,
if you like and pay her as an employee. This is a technique
sometimes used to get certain medical benefits. You, as a
sole proprietor, may hire your children (under age 18)
without either of you being subject to paying employment
taxes. Depending on the amount of income, you pay the
children, you may have to withhold income tax.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Thank you very much for your helpful responses. Here is a
follow up to the question about why the wife wasn't listed
as a partner.

Does the husband and wife in this case have to be specified
as partnership? Any formal papers or IRS form required?

They weren't formally declared as such, as the wife is not
involved directly in the music business either as a partner
or employee. Maybe except to put in her two sense here and
there. Isn't she just implicated in the business only as
much as she is a wife and therefore automatically an assumed
partner for property and liabilities?

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Paul A Thomas wrote:
- quote -

I have to disagree with that answer - ONLY because we don't
know that the children are under age 18. Ages were not
given in the question.

- quote -

The PARENT would have to do that, not the children. The
parent is the employer.

- quote -

Only if the children are under 18. Remember that their ages
were not stated.

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John H. Fisher wrote:

(snipped a bunch here.....)

- quote -

Julian BOND?

Nah, he's that lawmaker in Georgia who gets in trouble
every now and then. Paul Thomas knows of whom I speak I
reckon.

How about our old friend from back on Prodigy tax board,
Julian Block?

ChEAr$,
Harlan

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"Don Domhnaill" wrote:

- quote -

Paying them once per year can be hazardous in the event of
an IRS audit. The children should be managed and paid in
the same arm's length way as you would an unrelated person
doing the same type of work.

Fred F.

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Don Domhnaill <domhnaillT[at]hotmail.com> wrote:

- quote -

I'm confused. Does wife work as an employee for husband's
sole proprieorhsip? If yes, then wife will need to have all
the payroll tax stuff filled out for her.

If she is not an employee, how di she happen to hire kids
for husband;s sole priprietorship? Is this a partnership?
If so, and if not in a community property state, then an EIN
and partnership return are appropriate.

- quote -

They will not be paying taxes then. They can give you a W)4
marked exempt if they meet the Exempt rules.

- quote -

So long as that's a fair wage based on their contribution to
the business, that's fine. No FICA needed for your minor
children.

- quote -

You pay them and deduct that as salaries. Kids do not earn
enough to pay income tax nor do they pay FICA.

- quote -

No. They will give you a W-4 marked exempt if tat applies
or even with 0 exemptions, 1500 spread evenly throughout the
year should not have any tax withheld.

- quote -

no

- quote -

See IRS Pub 929, but from your figures the kids do not have
to file.

They might want to file to establish they had earned income
for purposes of contributing that 1500 to a Roth IRA, which
is probably a very very good idea at this time.

- quote -

Open a Roth IRA

- quote -

Yes, with box 1 only, filled out.

- quote -

yes,but check with your accountant for a recommendation.

- quote -

No.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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- quote -

NO

- quote -

Total wages are shown on line 1 of the Form 941.
Taxable Wages are a 0 on taxable SS and Medicare Wage lines.

- quote -

Yes!!! Although I know of some clients who, under audit,
made the claim (without having filed the 941's) and it was
honored. I'd suggest the best way would be to file the
forms, issue W-2's to the children, and have the children
invest the money in Roth IRA's

- quote -

Not unless their other income would require them to file
(interest, dividends, investments, etc).

- quote -

Nope!!! Of course, as said before they could be putting the
money into Roth IRA's

- quote -

He should, since he is making the report on the 941.

- quote -

Yes!!

- quote -

No!!!

- quote -

Here's an article by Julian Bond which may help clear up
some of your issues:

http://www.barbarabrabec.com/HOMEBIZ...Kids-taxes.htm

- quote -

I dunno?????????=

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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"Don Domhnaill" <domhnaillT[at]hotmail.com> wrote

- quote -

No.

- quote -

The Form 941 ~must~ be filed reporting thet appropriate
numbers.

- quote -

Yes.

- quote -

Probably not.

- quote -

Prepare and file Form(s) W-2 reporting the kids wages.

- quote -

Yes.

- quote -

Probably.

- quote -

No.

There may, or may not be state taxes to deal with, and/or
state unemployment tax (or at least the reports) to be
filed.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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Hello everyone,

Seeking help on a family business tax issue.

My talent is more in music than business. I need to help
out a fellow musician and family man with a tax issue. (He
is planning to get CPA assistance on this too, but I want to
see if I have steered him right - especially since I sort of
led him into the plan to begin with).

Jim has a sole proprietorship - Music Performing and
Recording.

He and his wife have hired their four children to play
instruments and sing in the family band and work in the
recording studio doing odd chores, paperwork, etc.

The yunguns have no "unearned" income to speak of, perhaps
each $50 tops yearly.

As for the "earned" income, they are planning to pay them
about $1500 each per year (paid once annually) for the first
couple of years until the band gets going big time.

Lots of sites all over the internet about how you can save
lots of money hiring your own children - but NONE tell you
how to set it all up !!

Jim filed for an EIN, and then started getting FORM 941's
etc. Him and Karen are extremely confused with all the
paperwork and now Karen doesn't want me to sit in with their
band anymore because she thinks I led Jim astray.

So here's the questions:
1. Do they have to withhold tax on their own kids if each
income is only $1500 ?
2. If they do have to withhold - do they have to do it on
a 941 Form ?
3. If they don't have to withhold tax, do they still need
to file a form 941 ?
4. Do the kids need to file 1040 forms ?
5. If the kids don't file 1040 Forms, do the kids need to
do anything else ?
6. Does Jim need to issue them a W-2 for $1500 each year ?
7. What if Jim didn't issue the W-2 last year, can he still
do that ?
8. Does Jim have to file anything with Social Security since
he is exempt from SSA withholding on own children under
age 18 ?

I know this is asking alot, but it is really confusing. I
wish there were some sites that spelled it all out clearly -
as much as there are sites suggesting this tax saving plan.
Even the selections on www.irs.gov seem to skirt around the
issue of telling people how to handle the paperwork involved
in hiring their own children.

Thanks in advance.

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