Own a Business? Why You Should Hire Your Child This Summer

Many self-employed parents have no idea that it’s absolutely legal—and a great tax move—to hire their own kids to work in their companies. Better yet, it’s a great way to help your kids develop a work ethic, teach them some basic work skills and encourage them to work for their spending money.

Better yet: your business doesn’t have to be a full-time gig. If you work a regular job, but sell items online on the side and report your profit on your taxes as self-employment income, you own a business. You can hire your kid this summer.

The most important things to keep in mind when hiring your kids are to make sure:

  • You keep a log of their job responsibilities and work hours
  • Your kids are old enough to handle the work, and
  • You pay your kids a reasonable rate for their time

Why Hire Your Child?

There are many reasons you might want to pay your kid to work for your. For one, you may have some very basic tasks you need done, from shredding documents to light online research. You might not have time to do it yourself. However, you may have a tough time hiring anyone for an hour or two of work each week.

Second, you may want your child to start working for money, rather than just getting handed an allowance. If you own your own business, you can feasibly hire your 10-year-old. However, there’s pretty much no chance an outside company would be willing to hire a kid that young (unless they’re an actor or model)!

Finally, you get a tax break for paying your kids (it can fall under an accounts payable category of “office help”) AND the money stays within your family.

How to Legitimately Employ Your Kid

The Internal Revenue Service (IRS) is well aware that many business owners hire family members. It’s not a tax scam to do so—as long as you follow IRS rules carefully. Here’s how to hire your child and stay on the IRS’ good side:

Document Your Child’s Work
In case the IRS ever audits you, create a formal job description for your child and keep it on file. Also set your kids up with W-4s (Employee’s Withholding Certificates) and I-9s (Employment Eligibility Verifications) with your business, suggests the legal site Nolo.

You should also keep time sheets for your child’s work, just as you would require of any employee, notes Nolo. It doesn’t have to be fancy. Work logs can be handwritten in a notebook or typed into a computer—whatever is easiest. Just keep consistent records of your child’s hours and the work they did.

Pay Your Kid a Reasonable Rate
You can’t really get away with paying your tween $50 an hour to shred documents and clean your office. The IRS may assume you’re trying to create a nice little way to shield your income from taxes. Minimum wage is probably a safer bet for basic tasks.

However, if your teenager takes photos for your company and posts them on social media, for example, or does similar higher-level tasks, you can pay them a bit more. Check online job sites or call a local temp agency to see what workers are typically paid in your locale for a similar type of work.

And here’s a good one: You actually have to write your child a check or you could transfer money from your business account to their Greenlight card. In other words, you have to pay your working kid real money. You can’t give them pizza or pay for summer camp and claim that those items were in lieu of an actual salary. That’s a big IRS no-no.

What About Taxes?
If your kids are age 17 or younger, you’re not required to withhold Medicare and Social Security taxes from their pay. And if your child is under age 21, their wages aren’t subject to federal unemployment taxes. These rules generally apply if your company is a sole proprietorship or Limited Liability Company (LLC), according to Entrepreneur. If your company is incorporated, or you just want to be sure you’re doing things correctly, talk to a tax pro.

Will your kid have to pay taxes on what they earn from you? Depending on your child’s overall income (are they getting money from anywhere else?) and how much you pay them annually, there’s a good chance your child won’t have to pay any federal or state tax on earnings from your business.

In other words, when it comes to hiring your kids to work in your business, it’s pretty much a win-win all around.

(photo courtesy © Intel Free Press cc2.0)

Amazon Prime Day 2019 with Greenlight

18.5% of Greenlight kids have spent money at Amazon

So by our predictions, your kids are probably already buzzing about Amazon Prime Day next week (July 15-16). Maybe they’ve been reading rumors of most epic tech markdowns or set up fancy price alerts to know as soon as their prized item is down to their savings goal balance. (Want price alerts of your own? Here’s one way to set them up.)

As always, we’ve been thinking about how Prime Day can fit into money talks, plus how Greenlight can help you manage spending safely. 

Time for budget talks

What makes a good deal? Fortunately, most kids are expert Googlers. Before they click for the checkout button, work with them to search for competing prices and to balance the value of the newest version of the computer or sneaker they’re eyeing vs. last year’s model.

Set up greenlights

Set up greenlights to control how much your kids can spend at Amazon. No shocking credit card bills. No overdraft fees. No surprises.

Amazon Prime Day 2019

Back to school is upon us

For some districts, school is back in session in July. Now is prime time (see what we did there?) to think about clothes, supplies and electronics your kids need for the next year. 

Bring kids into the conversation. Set a budget for each child and talk with them about Amazon deals fit into that budget. 

Pro tip: Scary Mommy will be live blogging the best back to school Amazon Prime Day deals next week. And we’re on the edge of our seats. 

We’re sitting on some great ideas on how to bring kids in on back to school shopping without getting in the way. Stay tuned – more on that topic over the next couple weeks.

Haven’t joined Greenlight yet?

Get started by signing your family up today.

Summer Spending & Saving with Greenlight

Summers are busy. Between visits to grandma, beach trips, summer camp, and the inaugural summer job (!), your kids may be spending tons of time away from home. Throughout the coordinated chaos, Summer offers great opportunities to continue money talks with your kids.

Family Vacations

Many families go on summer trips. In fact, 68% of you fine American families* will hit the road before school starts. 

Use this as an opportunity to talk to your kids about the value of saving. Discuss the tradeoffs you made throughout the year to fund your excursion and talk about the specific costs associated with you trip. 

Scholastic has a lesson with a couple handy worksheets – including a trip cost calculator in case you need a bit of help. (Don’t worry – we also learned a thing or two.)

Summer Jobs

For parents of teens, this summer may be the first one employed, and may it be the first of many. Before your kids pull out their Greenlight card to spend all of their Friday paycheck on Fortnight Battlepacks, remind them of the practice of saving. 

Work with them to develop a distribution plan for their paychecks. How much will they put into Save, Spend and Give accounts on a regular basis?

The first job is probably the first time your kids encounter the not-so-simple world of income taxes. And before you click away from this page in search of safer waters, know that the earlier you approach the subject of Uncle Sam with your kids, the more prepared they’ll be when the leave the house. 

Going over their pay stub is a great way to show teens how taxes impact their take-home pay. Talk with them about the purpose of social security, medicare, federal, state and local taxes. The Consumer Financial Protection Bureau has a simple guide to the anatomy of a paycheck that may help. Remind them that smart budgeting (see savings tip above), helps you account for the tax you pay.

(Side note: did you know teens can directly deposit their paychecks into their Greenlight accounts?)

Back to School

In 2018, Deloitte estimated families spent $510 per child**, on average, on back to school expenses. Between clothes, electronics and general supplies, that’s a hefty penny. And also an opportunity to reinforce the conversation of budgeting, especially when it comes with the price tag of a new school year. 

Later in July, we’ll talk about how to instill healthy money habits into routines as the kids go back to school. Follow us on social media for the latest tips and tricks about money talks and recent updates to the Greenlight app.

Don’t have Greenlight yet? 

Get started by signing your family up today.

*2019 AAA Travel Survey

**Deloitte 2019 Back to School Survey