A. Yes. Let’s say you pay your son $5,000 this summer that you normally would have received as compensation. Suppose you’re in the 33 percent bracket and your child is in the 10 percent bracket. In that case, you’d have to pay $1,650 in income tax on the compensation (33 percent of $5,000) and $72 in FICA (1.45 percent of $5,000) for a total of $1,722. In comparison, your child would pay $500 in income tax (10 percent of $5,000), plus $382 in FICA (7.65 percent of $5,000) for a total of $882 … or $840 in family tax savings. Tip: No FICA is due for your under-age- 18 child if your business is a sole proprietorship or a husband/wife partnership.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Keep superstars on board with sabbaticals—even during tough times
- Always verify FMLA eligibility before approving leave
- The Genetic Information Nondiscrimination Act finally becomes law
- What grads must learn to make the leap from school to work