If you have kids you know how expensive they can be. From the necessities to all the extras; the toys, the clothes, the entertainment, the extra-curricular activities and so on... wouldn’t it be nice to be able to get tax deductions from all the money you're spending? So here it is! How to Pay Your Kids and Write Off Your Kids' Expenses to Save Taxes! Enjoy! 📽 VIDEO RECOMMENDATION - How to Pay off Your Mortgage Within 5 To 7 Years:
RECAP OF THE VIDEO:
I'm a real estate investor and a Dad-To-Be and in my business, I don’t just focus on using strategies that make more money but also focus on using strategies that will allow me to keep as much money as possible.
To make this strategy work, your kids have to be involved in your business and put them on the payroll for actual work being done. You can begin by putting your kids on the payroll as early as 5 years old and start giving them small jobs such as stuffing envelopes, shredding paper, cleaning, filing, bookkeeping, scanning... By doing this, not only are you saving taxes, but you're teaching your kids small business ownership skills, self-reliance and a concept of hard work.
(NOTE: Sam Kwak and the Kwak Brothers are not Tax Professionals or are they Legal Professionals. Please consult with your Tax and Legal Professional when using this strategy in real life. CPA and Attorney, Mark Kohler, is a huge fan of this method. You can also check out his YouTube channel for his explanation of this strategy)
Now, when paying your kid(s), each one of them needs to have their own bank accounts set up and whether you operate as a Sole Proprietor or an LLC you're paying your kids directly to their bank accounts from your business account if they are under 18 years old. If they are 18 or older, then issue them a 1099 or W-2 at the end of the year.
If you operate your business as an S-Corporation (Or an LLC with an S Election) then you will need to set up a “Family Management Company” (but is only needed if paying children under 18 years old) which will operate as a Sole Proprietor and pay that “Family Management Company” the kids salary as a fee then transfer the money from there into their bank accounts.
Using that money, your kids can pay for their own clothes, shoes, video games, ice cream, violin lessons, or whatever they'd like to spend their money on! Essentially, you're getting a tax write-off on those things! This can quickly amount to THOUSANDS of dollars of tax saved each year!
If you have an S-Corp. and you are paying kids that are 18 or older you do not need the “Family Management Company” just issue them a 1099 or a W-2 at the end of the Tax Year. The benefit of paying your own kids is that if they are under 18 years old you do not need to issue workers comp. or FICA (except in the State of Washington) also they will not need to file taxes if you pay them $12,000 (Standard Deduction) / year or less.
🤔 QUESTION - Is this even legal or ethical?
Legal? Yes... If your kids are doing REAL work for your business and they are getting reasonably compensated, you can certainly take advantage of the tax write-off. There are actual Audit Cases where the IRS agents are fully aware of this type of arrangements between family members.
🤔 QUESTION - Will I Get Audited If you Do this?
This is a tax professional question and you should have a conversation about having a tax professional help you prepare your taxes. I've seen a countless number of business owners take advantage of this strategy and yet, year after year, their returns are accepted by the IRS without any Audits.
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The Kwak Brothers are millennial real estate investors who have acquired over 82 Units of Rental Units and have raised over $20,000,000 of capital for their real estate deals. They are based out of the Chicago-land area and they are dedicated to helping hard-working people become financially free real estate investor! They specialize in owner financing acquisition and raising capital. They are the creator of the FORCE Strategy (Find the deal, Owner Finance It, Raise the Capital, Cashflow It, and Expand your Financial Freedom)
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Video Filmed by:
Christopher Dorsano - Creative Director
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