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Small Business Tax Q&A: July ’18

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in Small Business Tax

Tax twists for teenage child

Q. I paid my teenage daughter to update our company website. Are there any tax consequences? T.S., Nashua, N.H.

A. Yes. Unless it is a gift, your child has received taxable compensation. Although the Form W-2 reporting requirement only applies to wages above $600 for the year, any amount is technically taxable to the recipient and usually deductible by the payor. In most cases, your teenager won’t owe any tax anyway due to her standard deduction. What’s more, you might have your daughter exempt the wages from income tax withholding on the W-4 she fills out.

Tip: If your business is unincorporated—say, a sole proprietorship or partnership—wages paid to your under-age-18 child are exempt from Social Security and Medicare taxes.

Getting personal about corporations

Q. Did the new law eliminate the rules for personal service corporations? M.R., Houston

A. Not exactly. The rules for perso...(register to read more)

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