Put Your Kids on the Payroll
If you do it right, it can save on income and payroll taxes
If your children help around the operation, putting them on the payroll for real work is one of the simplest ways to cut the family tax bill. Done right, it moves income out of your bracket and into theirs, where much of it is taxed at zero.
Start with the payroll tax break. If your farm is a sole proprietorship or a partnership owned only by you and your spouse, wages paid to your own child under age 18 are not subject to Social Security or Medicare tax. Under age 21, the wages are also exempt from federal unemployment tax. That is a real saving you do not get when you hire the neighbor’s kid. One caveat: the exemption does not apply if the farm is a corporation, or a partnership that includes a partner who is not the child’s parent.
