A Summer Job For Junior

KEEP IT IN THE FAMILY
If you find $500 worth of work each month for a child to do during the three summer months, what would you save?

Assuming you’re in the 15 percent tax bracket:

$1,500
x .15
$225 tax savings

For those in the 25 percent bracket, the savings would be $375.

Assuming the work is something you would have employed an adult to do, you would also save your share of FICA tax:

$1,500
x .0765
$115 FICA exemption

Got a child with too much free time this summer? Put him or her to work part-time in your owner-operator business. The government will gladly subsidize your payroll in the form of a lower tax bill.

Truck washing or basic bookkeeping duties would be suitable things to assign to a child, says Doug Kozeny, a vice president with Larsen & Associates Truckers Professional Services in Omaha, Neb. “They could help sort receipts or total receipts,” he says. “They could run errands for truck supplies or groceries.” A child smart enough to understand settlements could review your paperwork to make sure there are no irregularities.

Your child can earn up to $4,750 a year from you (and other sources combined) before income tax is owed. Whatever you pay the child helps you because it’s a business expense that reduces your income reported on Schedule C.

There is no minimum age for employing a child, though the Internal Revenue Service might raise an eyebrow if you’re paying your 8-year-old to deal with an online load-matching service. Pay, too, should reflect fair market value, Kozeny says. No $300 truck washes.

As with all things taxing, you can’t escape red tape and paperwork:

  • Keep a log of hours worked and duties performed.
  • Pay by check or get vouchers to use with cash payments.
  • You must keep payroll records and issue a W-2 form, as any employer would.
  • The child must be younger than 18, and your business must be unincorporated, for wages to be exempt from FICA (Social Security and Medicare), which is 15.3 percent of wages – half (7.65 percent) from the employer, half from the employee.
  • The child must be younger than 21 to be exempt from federal unemployment tax. State unemployment tax requirements vary by state.

The tax savings are, at best, several hundred dollars if you employ a child throughout the year – though every little bit helps. The other advantages, in addition to easing your workload, are helping to teach a strong work ethic and possibly even a love of trucking. Those things can be worth more than any tax break.

The Business Manual for Owner-Operators
Overdrive editors and ATBS present the industry’s best manual for prospective and committed owner-operators. You’ll find exceptional depth on many issues in the 2021 edition of Partners in Business.
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