Looking for ways to enhance retirement or plan for college costs? Consider hiring your spouse or your children to help in the family business.
There are often opportunities for spouses to perform some services within a family business. Office-oriented tasks such as paying bills or assisting in collecting aging accounts receivable are appropriate – after all, it’s their money too. An added benefit, depending on your company’s retirement plan, is that your spouse may be eligible to put away all of what they earn into a qualified plan, essentially making their earnings tax-free. You may be able to double what you can save for retirement without increasing your personal taxes. Even if your spouse doesn’t meet the eligibility requirements for the company’s plan, he or she can typically put money into a Roth IRA or a traditional IRA, since it is earned income.
Cleaning the shop floor or painting offices not only builds character, it's a great way to help fund upcoming college tuition. Consider hiring an age-appropriate child to help around the business. Money earned can be put into a 529 plan or even a Roth IRA. One advantage with a Roth IRA is that contributions can be taken out at any time without a penalty. If the child earns a scholarship or has a change of plans, the money can stay in the Roth IRA to be used for their retirement or even towards the purchase of their first home.
Whether it is your spouse or your children, keep in mind that Internal Revenue Service rules state that services do, in fact, need to be performed in order to receive a paycheck and the wages paid should be reasonable for the services being performed.