Benefits of Paying Your Children to Work for You

Successful business owners don’t pay their kids an allowance. They compensate them with a paycheck.

If you are a business owner with kids living at home, consider hiring your kids to work for you. Often known as “income splitting” or “income shifting,” paying your children has a number of benefits for both you and for them. This makes it a win-win situation for all parties involved.

First of all, there are tax savings you can enjoy by employing your own kids. You can pay them a certain amount of money and then “shift” this income from you to them at a lower tax rate or completely tax-free. This depends on your type of business and how much you choose to pay them.  This can be done through payroll, and your child will be classified as a regular employee. Taking these steps can save you a significant amount of money.

Another benefit of paying your kids is that it will teach them about handling money. Remember that a piggy bank can only go so far. By writing a paycheck to your kids, they can learn what it’s like to work for an employer while working for you. This will give you more control over what they do and will likely make them more comfortable working for you rather than someone they don’t know. In addition, earning income is a requirement for establishing a retirement account, such as an IRA. It is never too early to get the ball rolling on this.

There are a few things to keep in mind before making the decision to hire your children. To qualify for tax-exempt FICA status (federal insurance contributions taxes) under your business, your kids must be under the age of 18. Kids who are 18 through 20 years of age are exempt from FUTA (federal unemployment taxes), but this is an extremely limited tax exemption. There is no set minimum age, except when the job at-hand involves mining, manufacturing, or any labor that involves potential environmental hazards.

There is also a maximum standard deduction that must be taken into account for federal tax purposes. For 2012, this deduction is $5,950 per taxpayer. This means you can pay your child up to $5,950, and you won’t have to pay any federal taxes on this money because it is entirely deductible. If the amount you pay your child exceeds $5,950, you may owe federal taxes on it. Keep in mind, however, that some states will also impose state income taxes on certain amounts of income earned by children even if it is not subjected to federal income taxes.

Since teens are struggling to find jobs in the current job market, it makes more sense than ever to hire your kids. If you want more information about the benefits of having your children work for you and the associated payroll methods, be sure to contact 1-800-ACCOUNTANT today.

Estate Taxes: The Basics

When a loved one passes away, there are so many responsibilities a family must undertake. One of these is to ensure that this individual’s estate is handled properly and that any estate taxes on it are covered.

An estate tax is a tax that must be paid by those who inherit money or property from an individual who has passed away. For individuals who have died after 2010, estate tax returns must be filed if an individual’s gross assets exceed $5 million. It’s fairly straightforward to calculate estate taxes owed on money. But for property, the “fair market value” is used to assess the value of the assets in an estate. This determination is made by considering how much a particular item would go for between a willing buyer and seller. Assets in an estate often include money invested in stocks or bonds, real estate, trusts, insurance, and business interests. The total value of these assets is called the “gross estate.”

After the gross estate value is tabulated, there are some deductions that could come into play. Never pass up the opportunity for deductions, and this thinking is essential from a financial standpoint when handling an estate. Estate tax deductions may entail debts, mortgages, and property passed on to surviving spouses or to qualifying charities.

If an estate contains items that are reasonably easy to put a value on, an estate tax return may not need to be filed. These types of estates contain cash, publicly traded stocks, and other assets that are commonly part of an estate. They differ from estates with special deductions, elections or property that is jointly held. These kinds of estates require more attention when determining their value.

Estate taxes are viewed as some of the most complicated taxes on the books. That is why having a CPA or an enrolled agent at your side is essential when handling an estate. Contact 1-800-ACCOUNTANTANT today!

What is a CPA and why are they important?

It’s always reassuring to pick the brain of someone you can trust who has the experience and knowledge to help you. In the world of accounting, this is always the case when working one-on-one with a CPA.

A CPA is a certified public accountant. This title is given to accounting professionals who have passed the Certified Public Accountant Examination and have met other standards depending on which state they work in. They must take continuing education classes to stay abreast of changes to regulations. Licensure to work or assist clients in all 50 U.S. states does exist as well, and these CPAs are extremely versatile in their field. In general, many CPAs know the most efficient ways to file both personal and business tax returns with the IRS, although some specialize in specific types of filings. They know the ins-and-outs of the lengthy federal tax code as well.

If you are seeking advice on your financial situation, bringing a CPA on board can have a major positive impact on your personal and business finances. CPAs are particularly resourceful if you are a small business owner. Lots of business taxes and laws exist that you must be aware of prior to starting a business and as you maintain it. It’s a worthy investment to make a CPA part of your team. The ability of CPAs to work remotely is a big plus as well since many CPAs can communicate by phone or e-mail. This eliminates time on your part as a business owner.

CPAs are also fully educated on common legal matters that relate to business and finance. Don’t get caught red-handed by violating a law with which you are unfamiliar. Run your situation by a CPA to make sure you are playing by the rules. The law can be complicated, and most of us don’t know everything about the law, so don’t be afraid to seek assistance.

Enjoy high quality service from CPAs by contacting 1-800-ACCOUNTANT today!

Happy Holidays from 1-800Accountant

From all of us at 1-800Accountant, we want to wish everyone a happy holiday and to have a safe and enjoyable New Year! We have appreciated all of the business and support from all of our friends, clients and fans in the past year. We are looking forward to continue serving all of you in the upcoming year of 2013. Have a safe and happy holiday!

Tax Deductions for Holiday Gift Donations

A gift boxThe holidays are here. The festive spirit is in the air. People are getting into the gift-giving mood that comes along every year for the holidays.

Donating gifts to charity is an excellent way to help out underprivileged families and cheer them up during the holidays. There are so many children whose families cannot afford gifts at the holidays and don’t get the opportunity to open presents like other kids do. By giving a gift to a charity, it will give you that good feeling inside to know that you are making a difference in someone’s life.

Donations also provide another benefit – tax deductions. As a taxpayer, you have the ability to receive tax breaks on these donations by claiming them on your tax returns. This means you won’t have to pay taxes on them. You must document and itemize each gift so that the IRS knows exactly how much you spent on the items. Documenting cash donations is especially important. You must have written documentation about the donation and a description of any other property donated if the total amount is or exceeds $250.

Gifts must also be given to a qualified organization in order to be considered tax deductible.  This means you should consider giving to charities that are reputable and well established. Donated items like plastic toys, stuffed animals, electronics, and clothing should be in good condition or better to qualify for deductions. Special rules apply when donating vehicles to charitable organizations.

Learn more about donating gifts and tax deductions from 1-800-ACCOUNTANT.