Is Child Labor Legal? - Putting Your Kids on Payroll

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For those of you who have kids under 18 and own a small business LISTEN UP!!!
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Опубликовано:

13 июн 2018

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Комментарии : 246

@RipMa 4 года назад

Ive had my own business for 5 years and never ever thought I can do this. This is why im so upset this is never taught in schools. Thank you so much. I will definitely be spreading this info to my friends and family.

@LaDeeDah 3 года назад

I just opened 3 months ago, and I'm prepping to hire my 7 year old. At least you're doing it now! ❤

@elhardtrealestate3937 3 года назад

Not all CPA's are created equal. Mark is awesome and I've worked with is firm many times for various things through the years. You don't need Mark personally if you can find a CPA that actually specializes in businesses and investors and isn't just a W-2 mill. A great CPA asks "how can we do that" not "you can't do that." There is a wide playing field before anything is out of bounds - the IRS knows what normal looks like and so does your great CPA - no reason to fear an audit as your chances are near zero and no reason also to fear one if you get one with a solid plan behind your return. A great CPA MAKES you money. Let's help get this country grow the habit of getting plugged into experts to play the game for real instead of just hating on the "rich." Thank you Mark for your generous education.

@MarkJKohler 3 года назад

Thank you for the generous comment! I'm so glad you have found our services to be helpful. You are very welcome for the videos and other education.

@Pepelepu2u 3 месяца назад

Except that the information he is providing is not true. Not getting caught is different from it being right.

@Homeschool494 2 года назад

So I am just seeing this now, my children are 9, 8, and 5 years old. We have a pretty well established business of 8 years. I sent this to my accountant as well as my financial advisor. We just found out December 2021 that we could even start doing this, but no one seems to know how to start. This was VERY informative and explains how friends and colleagues have their children starting small businesses from a young age! We are young yet and still learning a lot about business, neither of us went to business school and we built this business from the ground up... Literally from pinching pennies to overseeing 12 employees. We definitely want to leave a legacy for our children, since both of us grew up with nothing and our parents never thought ahead for us. (Literally no savings or college funds and our parents still struggle to get by even with a good earned income). THANK YOU FOR POSTING THIS!

@ijustfollowthesun 4 года назад

I LOVE YOUR BRAIN! Thank you, you are such a blessing! I’m so glad I found you!!

@rram6426 4 года назад

@2:29 Three way to pull this off (RULES

@SPARKWISDOM 5 лет назад

This is good information! Thank you.

@lojoco4 3 месяца назад

Thank you so much. I have been watching video after video to see if I needed to go through the hassle of w2 payroll for my 6 year old. Outside Labor. beautiful.

@misterrightfix4129 5 лет назад

Great Job! Thank you so much for taking the time!

@MarkJKohler 5 лет назад

No problem! Thank you so much for watching!

@sandspider79 6 лет назад

Excellent video Mark - always a good job explaining boring tax issues in a very friendly and easy to understand way!

@MarkJKohler 6 лет назад

Thank you so much!

@TheFocusOfLovecom 2 года назад

“Outside Labor” -Under 18 - tax free so no need for w2 -Kids own debt card/credit card -Transfer funds from business account to kids account

@Arkata 6 лет назад

Dude as always you're awesome with your videos, full of value!!! Thank you!

@MarkJKohler 6 лет назад

You're awesome! Thanks for watching!

@latebloomers9410 4 года назад

wow you just changed y kids lives with this video. thank you so much. ive shared this with every business owner i know.

@MarkJKohler 4 года назад

Glad I could help. Please keep sharing this video with anyone who you think will benefit from it!

@619caliman 6 лет назад

Thanks for the update.

@MarkJKohler 5 лет назад

No problem! Thank you for watching!

@HealingwithKey 4 года назад

Thank you Mark I have three daughters I’m going to set something up for them today!

@MarkJKohler 4 года назад

Kiana, that's great to hear!!!

@MsNashawn25 3 года назад

This is Gold!

@beautifulballoonsbybria5970 3 года назад

🤯 Thank you! 💪🏾🌟

@DevinCarroll 5 лет назад

Excellent video! Complex topic explained in simple terms. That is the mark of someone who really knows their stuff.

@MarkJKohler 5 лет назад

Thank you for watching!

@HappyTon-oy9vf Месяц назад

Thank you liked and subscribed👍👍

@PJTheHeartofaDrummer 2 года назад

Great tip!

@yoshi04cgn 5 лет назад

Good video and thanks for mentioning not having to deal with a W2.

@MarkJKohler 5 лет назад

You're welcome! Thanks for watching.

@mirellalilien2353 4 года назад

Great information!

@MarkJKohler 4 года назад

Thanks for watching!

@LatinoTaxPro 3 года назад

Thanks Mark!

@MarkJKohler 3 года назад

My pleasure!

@00theonly1girl 3 года назад

Great video!

@TraceysTripping 3 года назад

Head Exploding Emoji is RIGHT...lol I Like You!!!

@heleneshomes Год назад

This guy is the best!

@AndreaRamirez-uc2hh Год назад

HI Mark, this video was great! I am helping a client with this task, and this was so helpful. So just to be clear, if it is an LLC we can pay them directly. Outside labor expenses? Scorp we would pay another management corp.

@jiefuzhang5589 5 лет назад

Phenomenal content.

@MarkJKohler 5 лет назад

Thank you so much!

@joeorabona6170 6 лет назад

The penalty for not filing a W2 is a set dollar amount, not a %. You're confusing it with the 941 penalties, those are a percentage of the tax owed.

@wattsobx Год назад

Is this true? im still trying to understand what I need to file. So I dont need to do a 941 and 940 but i would a w2?

@BSTatonka 3 года назад

I pay them and they deposit toward a Roth IRA. Awesome

@mikepat3876 3 года назад

@BringRayn , do you file return for your kid to keep paper trail for Earned Income? If not, how and what document/proof of Earned Income are needed to show the eligibility for contributing to Roth IRA?

@sr-er1ip 3 года назад

@@mikepat3876 That's the responsibility of the Family Management Company. The whole reason you set it up is for the record keeping (recording hours, tasks, detailing job description, etc). Those records will show its legitimate "earned income." Now, the money you deposit into their Roth IRA is technically tax free (because it's below the individual standard deduction) but the IRS considers it after-tax money (because its a ROTH IRA). So it's a tax write-off to the C/S corp, tax free to the kid, is deposited tax free to an after-tax account and grows tax free forever!

@prettybrwneyez7757 2 года назад

@@mikepat3876 yes. file a w-2 and return as the paper trail

@leroybiggs9149 2 года назад

Live in CA... 12,550 is SD on 1040 in 2021, what about on CA 540? Cant find anything that speaks directly to State of CA's position of this strategy. (paying wages to dependent child from sole prop.) Very inspiring Mr. Kohler. Sitting for CPA soon, wish me luck!

@Creationsbyeva1 4 года назад

Great video

@MarkJKohler 4 года назад

Glad you enjoyed it

@kimberblake4215 6 лет назад

Mark, I never thought I could get excited learning this stuff. You make interesting and I appreciate all your help. I just started a small cleaning business and like so many, setup a sole proprietorship. I don't anticipate grossing more than $1500/mth to start with. Should I stay with this setup or convert to LLC now. I'm one month in.

@tre2453 3 года назад

Yes

@Simon-Misiewicz-US-UK-Taxes 6 лет назад

Amazing how the US and UK tax are becoming even more similar.

@MarkJKohler 5 лет назад

I know right?! Thanks for watching!

@TylerDalton 3 года назад

Would the same scenario apply for paying grand kids through the business?

@2ndTimothyOutreach 5 лет назад

QUESTION : 1) So what would the CATEGORY / EXPENSE for the S.CORP : SPOT LABOR? ..2) What is MANGEMENT FEE? what are we talking about? How much? Thanks for your help!

@MarkJKohler 5 лет назад

Ughh... HUGE question. Let me say, I have a book on this, my 8 steps workbook (all on amazon)...or if you know you are a candidate...PLEASE schedule a consult with my accounting firm or get your own accountant to pull there head out and help you. 🙄 This is a common strategy and more CPAs need to get on board.

@Too20two 6 лет назад

Wow !! Amazing info !

@MarkJKohler 6 лет назад

Thanks for watching!

@Too20two 6 лет назад

Mark J Kohler I’ve booked an appoint with one of your professionals for Monday, with my unique business situation I’m confident you guys will relieve my stresses ! Lol

@MarkJKohler 6 лет назад

That's awesome! I am excited for you!

@christinechae2162 4 года назад

Does the family management company have to be LLC or just sole prop?

@jessicaeccles6172 2 года назад

Thank you for this video. So easy to follow. Used Kristie Parker with his law firm and she was AMAZING with explaining everything and giving advice to my husband about the current and future structure of his companies. I could go on and on but definitely legit and I love his channel and his team!

@monikabennett 2 года назад

Aren't real estate companies required to file 1099-misc for all contractors above a few thousand or whatever small amount?

@nastashajohnson9256 4 года назад

Amazing

@MarkJKohler 4 года назад

Thank you! Please subscribe and share!!

@shugoosticks 2 года назад

Does the sole proprietor for the kids have to be formalized and registered with state?

@parnashish1910 4 года назад

Beautiful

@jonathanhill4782 2 года назад

How do I set up a family management account

@MegaSEOKing 4 года назад

That is why I use a tax PLANNER professional and a tax attorney. Many ways to cut taxes.

@MarkJKohler 4 года назад

I can't agree more!

@stuwilliams3477 2 года назад

Is this strategy still good for 2022? Sole prop FMC (LLC) receives pay from S-corp, FMC pays the kids via transfer into their own accounts. Can you provide any clarity on city or state taxes, how they will react when paying the kids in this way? Can you explain more about the FMC?

@jiangguoguo5002 3 года назад

Should I form a LLC for Family Management Company?

@rustyshackleford3874 10 месяцев назад

Where on the schedule C do annotate "outside labor?" Is it line 26 or 27a? Thank you! Amazing talk and topic!

@RyanH-me5ic 3 года назад

If I have an llc but I am taxed as an s Corp, would I need to create a separate sole proprietorship or could I pay them straight from the llc?

@mariaguild2024 4 года назад

So is sole "proprietorship the best/easiest way to get the kids on payroll..Asking because that is what I have.

@melisarobillard8009 2 года назад

While having an LLC and not issuing the w2, can I still fund the ROTH IRS without proof of income for my kids?

@kristopheranderson9270 7 месяцев назад

Mark, I am a fan! I listen to both of your podcasts regularly. I am now ready to employ this strategy. Is my step son an eligible child to be paid from my LLC? He lives with me and would like to employ him but unaware of the legal restrictions for blended families. Thanks.

@ChadPavelcpa 5 лет назад

Great video - I recommend this strategy too for my SMB clients. Great way to get money out tax free.

@pipfanatic9719 3 года назад

so how do I pay my child then if no w2 is needed do i just write them a check and let them cash it

@brcleaningcompany2566 3 года назад

@@pipfanatic9719 you find out yet bro? Since no one answered? Asking same question here

@thirtyish661 3 года назад

Has anyone figured it out? I’ve been on google/RU-vid forever trying to answer that question😂

@wattsobx Год назад

@@brcleaningcompany2566 I think (dont know for sure) you create a custodial/joint checking in their name and you transfer the funds with a paper trail. Is that what you were asking?

@James-dx6sf 2 месяца назад

I have been to Oklahoma City many times and there are no farms within the city.

@coyotedes6886 2 года назад

What is the best way to pay my children from a rental LLC for tax audit purposes? Can I pay them directly with cash? Do I have to write a written receipt? Do I have to open a bank account in their name and transfer the money?

@wattsobx Год назад

Can anybody who has done this let me know if you are not creating a W2 im assuming you did not do a 940/941 (quarterly/annaual) federal forms? Thanks!

@lacyhaller1864 4 месяца назад

I'm just now coming across this video, 6 years after it was published. Besides the standard deduction changing, does everything else still apply? Thanks!

@Jr-ro3jy 2 года назад

What about step children, neices, nephews, and or grand children will the same apply??

@BurmeseUSA Год назад

I have a small business LLC and my 10 years old and 4 years old been helping with cleaning, labeling, and customer service (greeting and explaining things to customers, cos we sell oriental groceries), and ads on Facebook. I would like to do a minor Roth ira for each of them. I already have Vanguard Roth IRA for myself but my husband just has 401 K from work. in order to set up a minor Roth IRA for each of them, what kind of tax paper shall I have for them when we do a business tax return end of the year? Thanks in advance for answering.

@brcleaningcompany2566 3 года назад

Has anything changed for 2020/2021? What if a child lives out of state? But i have a online business or do a lot of e-commerce and amazon, i usually would outsource a lot to virtual assistance overseas. I think i rather hire my child, My child lives in Florida I’m in Boston, can they still be claimed by the other parent if i hire my daughter

@danjohnson5114 5 лет назад

To clarify, if they don’t make $12k yr they don’t have to pay any taxes. My question, are they still a dependent on my taxes as well? If they do file, would it hypothetically increase their Social Security if it’s still around? If not, is it because it not withheld from their payments?

@wattsobx Год назад

Did you ever get this answered? I have the same question. I beleive we can still claim as a dependant.

@jean-pierreclaros4599 2 года назад

Are they still dependent when you file for taxes?

@whatsupsy00 2 года назад

What tax code is the outside worker on?

@anthemgardens4649 4 года назад

Nobody is explaining how to do the paper work though but when u file???? What’s the process??

@jessicaeccles6172 3 года назад

You need to contact a CPA or tax attorney. However, I found a pretty good guide online.

@amypolzella8349 2 года назад

@@jessicaeccles6172 but you didn't share it. How grand of you. PLEASE SHARE IT 😅

@disruptceo Год назад

You just deduct it on your taxes and make sure your kid has the bank account setup so the money is in there name not yours, obviously you can be the guardian on the account so you can control it for them

@wattsobx Год назад

@@disruptceo Did you need to file 940/941 or end up issuing a w-2?

@thehustlenetwork 2 года назад

Can it be a service business? Like helping clean houses

@amypolzella8349 2 года назад

I would say you need to check your local labor laws to make sure it's OK as far as they are concerned but yes any type of work they can safely and legally do should be fine.

@lHurtYourFeeIings 4 года назад

I still suggest issuing the W2. The child can contribute to a ROTH IRA. Without earned income, they can't do that.

@wattsobx Год назад

whats the negatives of issues the w2? Just the hassle of registering with the Social Security Admin? If you have a child under the standard deduction arent you just filling out like 1 box on the form? Just trying to figure out the angle on not needed the w2. (I already have an EIN for my LLC)

@kekepierson5121 2 года назад

I’m trying to formulate an llc in Pa where it’s legal for minors to part own. Do I just sign for him on the articles of organization?

@VaynaJerabek 3 года назад

Can I do this with my little sister or does it have to be the parent? And what if she’s currently 18?

@lseh4720 3 месяца назад

Can you do this if your only business is rental property owned through LLC’s?

@Judge_Jon 2 года назад

Does this work with grandparents business?

@drray6206 4 года назад

Thanks for the video! In terms of linking your childs ROTH IRA to your real estate LLC . If the LLC was ever sued could they come after the ROTH? IF you are paying your child via a ROTH IRA for working in your real estate business but their ROTH is not a business partner or does not own that LLC would that ROTH be vulnerable in the vent that LLC is involved in a law suit?

@MarkJKohler 4 года назад

Laws regarding retirement protection in the event of lawsuits vary state by state. The federal government has laws in place to protect many retirement accounts, including 401(k) and employer-sponsored plans. When it comes to IRAs, states have a greater jurisdiction in deciding what is up for grabs in the case of a lawsuit. Registering as an LLC would hedge against the risk of having money taken from your ROTH IRA in case of a lawsuit, but it would not give you 100% protection.

@e.gladewood1151 4 года назад

My wife and I have an LLC partnership and my CPA had us setup another LLC to pay my kids from. Exactly like you explained on this video for S Corps. However, it looks like we don't need to do that if we are an LLC partnership. Is there a benefit for doing this out of an other entity? Or, should we close that out and just pay them directly?

@MarkJKohler 4 года назад

Great question! there is a lot to it! I'd say your best bet is to watch some more of my videos, go to markjkohler.com/blog/ and find an article I have written, and/or give my assistant Rosalie a call at 435-586-9366 ext 2024 and have her point you in the right direction.

@rubenfelixojeda 3 года назад

Can i do this with my nephew?

@icnobulyz8088 3 года назад

I do love it and love you for the EDUCATION of The Indian Nation will be redeemed all shall be reviled

@fordhanson6655 2 года назад

Hello Mark, My name is Ford, and I am leaving my current company as an IT Manager as W-2 employee. On January 10, 2022, I will be starting with a new company but with a caveat that I will be hired as a CONSULTANT (1099 basis) for a few months, then convert/hire me as a full-time W-2 Employee thereafter!! Note: My Rate will realize between $40K to $50K for those few months in 2022. Question: Is it worth me getting an S-Corp? (i.e. Will my initial cost for setting up the S-Corp + your Service cost for Tax filings (Form 941) etc... worth spending vs me just keeping it as a Sole Prop?)

@emmanuelcuevas7024 2 года назад

Would I be able to this for my 12 year old brother?

@larryweiss7203 3 года назад

can this work for Grandkids?

@taufaaho6715 2 года назад

Does outside labor count for any small busniess??

@bobprentice8326 8 месяцев назад

Why con;t we have to issue a 1099 to kids out of the SP or LLC?

@Kirtirajsardesai Год назад

Excellent video. One question. In a single member LLC for rental property how can the LLC pay kids? Does the LLC need to issue W2 or 1099 to kids and if so does the LLC need to file its own returns or can it be pass-through?

@MarkJKohler Год назад

Hey there! I have past videos on this with more information that you can check out, or if you would like to dive deeper into you questions - you may want to get set up with one of our amazing Tax Advisors. Please head to markjkohler.com/tax-advisor-network/ - thank you!

@witnessthewrath8061 2 года назад

Is there a law that says you can't pay them generously?

@falseflag21 Год назад

To have an IRA they would need a W2 though right?

@bobbysyed1 3 года назад

Thanks for such great educational presentations. I have a S Corp (which owns a restaurant )with my wife, why can I not issue a w2 to my 10 year old for helping out at the restaurant ? You are suggesting to create a family proprietorship to pay the kid, that’s why I am asking . Thanks .

@RamboTheCEO 3 года назад

U can't because if u pay wages from a s corp it must be from a payroll service. The payroll service withholds taxes. The point is to NOT pay taxes. So u set up the family management company separately and pay them from there. The s corp in theory 1099s the FMC

@crystals6570 Год назад

Great video Mark, thank you. But I need some clarification. My husband has a SCorp I have an LLC. Should I still set up a Sole Proprietorship? Or can I have the scorp make payments to the LLC for this purpose?

@MarkJKohler Год назад

Hey Crystal! Thanks for watching!! It's hard to give the best advice in a short comment. Please reach out to my scheduling assistant Emily at emily.delarosa@kkoslawyers.com and she can help get you scheduled in a consultation, to discuss putting your kids on payroll.

@falseflag21 Год назад

@MarkJKohler if we pay out of the FMC do we need to give a minor a W2?

@da6express 3 года назад

So if you have an SP do you need to have an FMC to maintain the benefit?

@redinsight6725 Год назад

Per the video no, just documentation, record of work and the expense accounting of the transfers.

@joannaeldik4478 Год назад

@MarkJKohler hello mark thank you much for the details. If you don't mind if I employ my kids would I need to file a w-4 and an I-9? I know I don't need to issue a w-2 but I want to understand whether I need to file w-4 and i-9. Thank you in advance!

@MarkJKohler Год назад

To get your question answered, please submit it to podcast.mainstreetbusiness.com/ - thank you!

@joannaeldik4478 Год назад

@@MarkJKohlerthank you! How do I know I'd the question is selected or answered?

@kazzlee1125 4 месяца назад

Do I get a payroll to automatically do all that for me?

@amypolzella8349 2 года назад

OK so as far as when I am entering this under my business expenses I just put it under a misc line of "outside labor"? Im just not sure exactly where to expense this.

@wattsobx Год назад

Did you ever get an answer I too have this question and have not found a direct answer. I think they mean the schedule c you add a other expense and then identify it as "outside labor" and then if audited you provide the money transer, timesheets, and job duties. But im learning too.

@fluent_In_finance 4 года назад

Hi Mr. Kohler, can I do this for my parents? I have an online business plus I have rental properties. Could the llc be set up in such a way where I pay them monthly from my income? They live in another country.

@MarkJKohler 4 года назад

Yes, that family member can be a spouse, sibling, parent, or a child.

@fluent_In_finance 4 года назад

@@MarkJKohler thank you I appreciate you.

@DwayneVeritasLogan Год назад

Hi Mark, once I pay my kids (3 and 5 yr olds who act and model for my film business) via check or transfer to an account in their name, how can I legally allow expenditures from that account?

@MarkJKohler Год назад

Hey there, to get your question answered, please submit it to podcast.mainstreetbusiness.com/ - thank you!

@sc358. 4 года назад

Gotta family member that does not own a business, lives in CA and paid their child for babysitting during WuFlu. How can the child use that money as earned income and put it in a roth ira? What tax steps are needed?

@MarkJKohler 4 года назад

SC358, for more information on investing and self direct IRA check out my website directedira.com/

@ozzielomeli4690 6 лет назад

If my kids help me in my small business, does my business have to make a certain amount per year in order for me to pay my kids? I’m just starting out so I’m not making much

@bobbyhurley4869 3 года назад

What did u find out

@lionfromjam7282 2 года назад

Nope

@4everyoung16 Год назад

I just have one rental property, Do you think it’s a good idea to form an LLC? I believe it costs $800 a year here in Cali.

@MarkJKohler Год назад

To get your question answered, please submit it to podcast.mainstreetbusiness.com/ OR if you want to get set up with one of our amazing Tax Advisors to dive further into your questions, please head to markjkohler.com/tax-advisor-network/ - thank you!

@DavidTorres-nm6sx 6 лет назад

Do you have to file 941 quarterly? if you haven't hold any taxes from your kids

@MarkJKohler 5 лет назад

Hi David! Thanks for watching! This is a pretty in-depth question. To give you the advice you need, please reach out to our firm to schedule a 20 minute paid consultation with one of my attorneys. Call 435-586-9366

@marketbuy 2 года назад

@@MarkJKohler Mark, Your example of FMC, does this mean they (kids) need to create a business license since they are an outside 3rd party company?

@wattsobx Год назад

Hi David i have the same question did you ever get an answer? Thanks!

@DJLanta 3 года назад

Can I hire you for my CPA?? I need drastic help...smh

@terryfleming8738 3 года назад

My brain hurts learning this stuff lol

@STLEE87 2 года назад

Hey Mark ! I have a question. You talked about “ scam “ …. Is it really a scam or illegal to add family members on your payroll that DONT work for you ? To use the as “ payroll expense “ ?? Thank you

@amypolzella8349 2 года назад

What do you think? You're literally asking if it is illegal to lie on your taxes.

@gizchik00 2 года назад

For sole prop or LLc, should you pay minors with cash or check? Does it matter? Thank you!

@redinsight6725 Год назад

Documentation is always best, checks if you can as they are less likely to be challenged.

@dogenojonathan8 5 лет назад

Hey! I have an Amazon business that I just started last year. I spent almost 10k and my return was only on hundreds. My question is will I get any money back from my tax return so I can reinvest?

@brcleaningcompany2566 3 года назад

How’s it going so far? I do amazon FBA mysefl, mainly books,,, what part of amazon do you do if don’t mind me asking

@bobbyhurley4869 3 года назад

@@brcleaningcompany2566 how’s it going today