Is it true that my 18 year old son can work in my salon and make up to $5,000.00 per year that would go into a college savings account and he won't have to pay taxes on it??? and what if he works another job?
Thanks,
Carrie
A child can earn up to $5,700 in 2009 and there is no income tax. This is a combination of all wages. If you want to increase that amount you can put $5,000 into the child’s IRA. This would allow for wages up to $10,700 with no income taxes.
There will be Social Security and Medicare Tax withheld. A parent can pay wages to child under 18 without withholding employment taxes. After age 18 these taxes must be withheld.
If you are paying a child make sure that you have good documentation to justify the wage. In addition you need to make sure that you issue a W-2 at the end of the year.
Larry Kopsa CPA
