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03 - Accounting & Taxes Accounting Help & Tax Strategies

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  #1  
Old 05-30-2006, 12:49 PM
(RL)Ian (RL)Ian is offline
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Default pay for your child's work with LLC

In an multi-member LLC, I am a manager,
I want to pay my child for doing our magnet adverstising.
(design and distribution of the magnets)
The child is not a member of the LLC.
If I pay my kid $300 for the work, how do I do this
accountant-wise?
1. write the check for $300,
2. ....
3. ....
regards.
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  #2  
Old 05-31-2006, 09:11 AM
OldJack
 
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As a multi-member LLC that has not elected to be taxed as a corporation your LLC is taxed as a partnership (form 1065).

As a partnership (or as a sole proprietorship) your child under the age of 18 can work and be paid without social security tax being withheld (see quote below). Write the check ($300) as a payroll check with appropriate quarterly reporting on form 941 and annual reporting on W2. Federal income tax withholding is required if the child is going to earn enough that s/he would owe income tax on a 1040 tax return. The W2 would show gross pay in box 1 and any federal income tax withheld in box 2 and any state/city income tax withheld in appropriate boxes. Social security and Medicare income boxes and tax withheld boxes would show zero.

Quote:
Originally Posted by IRS Publication 15, page 8:
3. Family Employees
Child employed by parents. Payments for the services
of a child under age 18 who works for his or her parent in a
trade or business are not subject to social security and
Medicare taxes if the trade or business is a sole proprietor-
ship or a partnership in which each partner is a parent of
the child. If these services are for work other than in a trade
or business, such as domestic work in the parent’s private
home, they are not subject to social security and Medicare taxes
until the child reaches age 21. However, see Covered
services of a child or spouse later. Payments for the
services of a child under age 21 who works for his or her
parent, whether or not in a trade or business, are not
subject to federal unemployment (FUTA) tax. Although not
subject to FUTA tax, the wages of a child may be subject to
income tax withholding.
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Old 05-31-2006, 09:51 PM
(RL)Ian (RL)Ian is offline
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Thank you OldJack,
If I pay him/her per project, do I do the same? not weekly or monthly, but per project. If the kid works and finishes a project, he/she gets paid for it.
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  #4  
Old 05-31-2006, 11:20 PM
OldJack
 
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Its the same if s/he works per minutes, per hours, per day, per week, per month, per year, per unit, per piece, or per project, s/he is an employee and should get a W2 for gross pay.
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