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

The following excerpt is from “Making The IRS Work In Your Favor” presented by Mark W. Sullivan, EA at the CMC LIVE  hosted by Kevin Rutherford and Let’ Truck.

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
  • Duties should be related only to your business

What does 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 / Partnership 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

Standard deduction for SINGLE filers raised from $6,350 to $12,000.

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

Example: Employment Tax on Wages of $12,000

Sole-Proprietor

Corporation

FICA / Medicare / FUTA 16.8% $0.00

$2,016

Reference Material:

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

Questions? Contact Mark W. Sullivan, EA HERE or Schroeder & Associates, CPA’s PC HERE

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.

Start your 30-day FREE trial with no credit card required today!

Download Per Diem Plus for iOS HERE

Download Per Diem Plus for Android HERE

This article was written by Mark W. Sullivan, EA, Tax Counsel to Per Diem Plus, LLC and Of Counsel to Schroeder & Associates and leads the highly specialized Tax Controversy Group. His practice is concentrated in the areas of Federal tax controversies and litigation support/expert witness services in tax and other white collar cases. He also advises on tax planning and consulting for businesses and individuals. Mark has 25 years of experience in Federal Collection, Examination and Appeals representation.

Prior to starting a private practice in 1998, Mark was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service

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.

tax tips, tax tips for truckers, Trucker Taxes