How can hiring your children provide significant tax savings to the family business?

Q: Q: How can hiring your own children provide significant tax savings to the family business? —D

The following answer was provided by William Colangeli, CPA, O"Malley & Colangeli CPAs, PC.

A: A: Hi D, There's a few common things that hiring children can bring.

1) If your unincorporated, and the children are young enough, there's certain payroll taxes that you are exempt from paying.

2) You can move some of the business profit that would be taxable at your tax rates into the lower rates of the children.

3) You can increase the amount of the income shift in number 2 by having the children contribute to a retirement plan based upon the earnings that you pay them.

There is, of course, a right and wrong way to go about hiring your children. It's not a 'freebie' to be done lightly.