You’ve worked hard to build your family business, but are you making the most of every tax-saving opportunity available to you? If you’re not hiring family members or using strategies like Roth IRAs, you could be leaving money on the table—money that could be working for your family’s financial future.
At Insogna CPA, one of the top accounting firms in Texas, we specialize in helping small business owners like you unlock these powerful, legal tax-saving strategies. Let’s explore how hiring your spouse and children can help you reduce your taxable income, build long-term wealth, and keep more of what you earn.
Are You Paying More Taxes Than You Should?
It’s easy to think that hiring your family members could be risky or complicated, but the truth is, it’s a smart and legal tax-saving strategy—when done correctly.
Here’s what might be happening if you’re not using these strategies:
- Overpaying in Taxes: If you’re paying yourself a full salary but not compensating your spouse or children for legitimate work, you might be paying more than necessary in payroll and income taxes.
- Missing Tax-Free Wealth Opportunities: Without earned income, your children can’t contribute to tax-advantaged accounts like Roth IRAs for long-term, tax-free growth.
- Losing Deductions: If your spouse helps in your business but isn’t officially on payroll, you’re missing out on deductible wages and health benefit contributions.
You’re already working hard for your business. Let’s make sure your money works just as hard for you.
Why Many Small Business Owners Miss Out on These Savings
You’re not alone—many business owners overlook these opportunities because:
- It Sounds Too Good to Be True: Many people assume tax breaks like these only apply to big corporations, not small businesses.
- IRS Compliance Concerns: Worrying about audits or payroll taxes can keep business owners from taking advantage of these strategies.
- Confusing Tax Code: The rules around family employment and retirement accounts can be complicated without proper guidance.
That’s where working with a small business CPA in Austin can make all the difference. We simplify the process, ensuring you stay compliant while maximizing your savings.
Here’s How You Can Save More: Step by Step
Let’s break it down into clear, actionable steps so you can start saving on taxes right away.
Step 1: Hire Your Spouse and Save on Taxes
If your spouse helps with the business—whether it’s bookkeeping, marketing, or customer service—they should be compensated as a legitimate employee.
Why It Works:
- Paying your spouse a reasonable salary creates a tax-deductible business expense.
- If your business offers health benefits, you can cover your entire family with pre-tax dollars, reducing your taxable income.
What You Need to Do:
- Write a job description.
- Pay a reasonable salary based on the work performed.
- Keep payroll records and issue a W-2 at year-end.
Pro Tip: Need help ensuring compliance? Our team at Insogna CPA, a trusted Austin accounting firm, can help you structure this properly.
Step 2: Hire Your Children (And Cut Your Tax Bill Even More)
Yes, you can legally hire your children to work in your business—and it’s a smart move for tax savings.
Why It Works:
- Children under 18 working for a sole proprietorship or LLC are exempt from Social Security and Medicare taxes.
- Their wages are tax-deductible for your business.
- Kids can earn up to $13,850 (2024) tax-free under the standard deduction.
What This Looks Like:
- Your 16-year-old helps with social media posts, filing paperwork, or managing inventory.
- You pay them $10,000 for their work, which is fully deductible from your business income.
- Your child owes no federal income tax because they’re under the standard deduction limit.
Pro Tip: Stay compliant by issuing a W-2 and keeping detailed records. Need guidance? Our CPA South Austin team makes the process stress-free.
Step 3: Open a Roth IRA for Your Children
Once your child earns income from your business, they become eligible to contribute to a Roth IRA. This strategy not only teaches financial literacy but helps them build tax-free wealth for the future.
Why It Works:
- Contributions grow tax-free for life.
- Since children have minimal income, their contributions grow with no tax liability.
- Roth IRAs can be a powerful wealth-building tool if started early.
Example:
Imagine your 12-year-old contributes $6,000 annually into a Roth IRA. If it grows at 7% annually, they could accumulate over $1 million by retirement—all tax-free!
Step 4: Keep Your Family Business IRS-Compliant
The IRS allows these strategies—but only if they’re done correctly. That’s why partnering with a CPA firm in Austin, Texas is essential to stay compliant.
Here’s how to keep it legal:
- Document Everything: Write clear job descriptions for each family member.
- Pay Fair Wages: Compensation must be reasonable for the work performed.
- File Proper Payroll Forms: Issue W-2s and track all wages through payroll.
- Separate Business Finances: Keep personal and business accounts distinct.
✅ Need help? At Insogna CPA, we ensure you stay IRS-compliant while taking full advantage of tax-saving strategies.
Real-Life Example: How a Family-Owned Business Saved Thousands
The Martinez Family – Austin, TX
The Martinez family runs a successful landscaping business. After partnering with Insogna CPA, a leading accounting firm in Austin, they implemented a family employment strategy:
- Hired both parents as full-time employees.
- Paid their teenage son for marketing tasks and video editing.
- Contributed a portion of their child’s earnings into a Roth IRA for long-term tax-free growth.
The Result:
The Martinez family reduced their taxable income by over $15,000 and built a long-term tax-free investment fund for their son’s future.
Why Insogna CPA is Your Best Partner for Family Business Tax Strategies
Navigating tax strategies for family businesses can feel overwhelming. At Insogna CPA, we make it simple.
Why Choose Us?
- Expertise in family employment strategies and payroll compliance.
- Personalized tax planning for small business owners in Austin.
- Experience working with accounting firms in Austin Texas for proactive, strategic savings.
Whether you’re a sole proprietor or an LLC, our team helps you implement smart, legal strategies that maximize your savings and secure your financial future.
Maximize Your Family’s Wealth—Speak with Insogna CPA Today!
You’ve worked hard to build your family business. Now, let your business work harder for you. By hiring family members and using strategies like Roth IRAs, you can legally lower your tax bill and build lasting wealth.
Ready to take control of your taxes?
Contact Insogna CPA today—your trusted Austin, TX CPA firm—to schedule a personalized tax strategy session.