Now that school is out and kids have so much more free time, many Atlanta parents may be hoping or expecting their kids will get a summer job. Not only can working keep a teen or young adult busy and out of trouble, it can also teach them responsibility and the importance of working hard.
For some young people, finding a job is the easy part if they can get hired by their parents. However, this can put you, as the parent, in a critical position to understand and teach some important lessons about employment taxes.
As your child’s employer, you will need to determine how and if you are going to compensate your child. If you hire your son as an employee, you will need to pay him and withhold taxes in accordance with state and federal laws.
If you hire your daughter as a contractor, you should help her understand that taxes will not be withheld automatically, but she will be expected to pay taxes next year. This means you (and your child) will want to understand how set aside money for deductions.
If you want to hire your child as an unpaid helper or assistant, you will want to be clear on whether or not you can withhold wages and then claim other expenses as a business deduction. As noted in this Accounting Today article, you probably won’t be allowed to claim as business deductions alternatives forms of compensation, like fun dinners, later curfews or car use privileges.
Whether your children work for you or someone else this summer, it will be important for them to start learning how employment taxes work. Not only can this help them make good decisions for themselves, it can also help them appreciate the importance of complying with the law and follow proper tax procedures.
If you have questions about employment tax, you can reach out to a tax attorney who can help you understand what the laws say and assess your options as both a parent and an employer.