If you have a child under the age of 18 and you operate your business as a Schedule C sole proprietor or as a spousal partnership, you absolutely need to consider having that child on your payroll. Why is this beneficial?
1.) . Neither yourself nor your child pay payroll taxes on the child’s income.
2.) . With a traditional IRA, the child avoids all federal income taxes up to $18,200 in income.
If you are operating your business as a corporation, you can still benefit by employing the child even though you and the child have to pay payroll taxes.