If you hire your children to work in your business, either full-time or part-time, you could be eligible for special tax breaks.

The tax break is an exemption from the requirement to withhold FICA, or Social Security taxes, from your child's paychecks. Normally, a business pays 7.65 percent of each employee's salary in Social Security and Medicare taxes and withholds another 7.65 percent from the employee for the employee's share of those taxes. By not paying or withholding FICA from your child's paycheck, you save 15.3 percent.

 

If Bob hires his daughter Sharon to work 15 hours per week at $5.15 an hour, he'll save about $614.60 over the course of the year (15 x 52 x $5.15 x .153).

Child labor restrictions usually don't apply. There are both federal and state laws that pertain to employing children. Generally, employing a child under the age of 16 is a violation of federal law although there are certain exceptions carved out for employing children aged 14 and 15. However, the general rule that no child under the age of 16 years may be employed in any nonagricultural occupation does not apply to the employment of a child by a parent as long as the job is not in manufacturing, mining, or any other hazardous occupation as defined by the Department of Labor