Tax Saving Tips For Owner Operators & Family-Run Trucking Businesses

The following excerpt, "Paying your kids", is from "Making The IRS Work In Your Favor" presented by Mark W. Sullivan, EA at the 2018 CMC LIVE  hosted by Kevin Rutherford and Let's Truck.

Paying Your Kids

Trucking like any small business is often a family affair. My son started working in my accounting practice after school when he was 10 - shredding paper, stamping and stuffing envelopes. Whether you are a solo owner operator or run a trucking company, it is not uncommon to put your kids to work helping in the business.  Here is what you need to know to take advantage of a great tax saving opportunity.

Paying your kids to work in the business

First and foremost: Your children must be bona fide employees

• Their work must be ordinary and necessary
• Pay must be for services actually performed
• Services appropriate for your business
• Any real work for your business can qualify
  • Examples: answering phones, helping with your website, stuffing envelopes, or cleaning the office

• IRS has accepted that a seven-year-old child may be an employee

What does the IRS require for you to claim a child as an employee?

• Keep track of the hours your child works
• Have a written employment agreement specifying his or her job duties and hours

WARNING:

• No business deductions for personal services, such as babysitting or mowing your lawn at home
• Money you pay for yard work performed on business property could be deductible as a business expense

There are different rules for Sole-Proprietor / Partnerships and S-Corporations

Sole Proprietorship / Partnerships

Children under 21 wages subject to income tax withholding, but not :

• Social Security
• Medicare
• FUTA

Corporations

Children under 21 are subject to:

• Income tax withholding
• Social Security
• Medicare
• FUTA

Tax savings opportunity

In 2018 the standard deduction for SINGLE filers raised from $6,350 to $12,000.

• A child could earn up to $12,000 tax free

Reference Material:

Refer to: https://www.irs.gov/businesses/small-businesses-self-employed/family-help

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About

Per Diem Plus is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

About the Author

Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.

In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA

Disclaimer

This article includes general tax information, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case. Please consult with a licensed tax professional.