Tax professionals offer financial tips for employing your children on the ranch.
When I was a kid, my dad would sell me my show heifer each year. Slowly, my cowherd grew, and when a customer would come to buy one of my bulls, it was payday for me! My parents and I worked out a deal whereby they would retain 50% of my sales to cover the input costs required for that animal. Through 4-H record books, they showed me the cost of feed, fuel, machinery upkeep and miscellaneous expenses incurred from being in the cattle business. From a young age, they taught me the value of hard work, earning an honest dollar and saving for the future.
Frost, PLLC, Certified Public Accountants, recently published an article about how to best utilize kids on the ranch. Perhaps your kids are wanting to earn money for college, so they seek a job for the summer. Frost suggests hiring your children to work on the ranch instead.
According to the article, “By hiring the child to work for the business, it's a win-win for the family. But putting a child on the payroll isn't just a smart move from an employment standpoint. It can also result in several other tax and financial benefits.”
Of the six benefits the article cites, one that stuck out to me was setting up a Roth IRA for your kids.
“If your child has earnings from a job, he or she can contribute to a traditional or Roth IRA. The maximum contribution for 2012 is $5,000. Because the child's income is low, contributions to a traditional IRA are deductible on the child's return. Contributions to a Roth IRA aren't deductible, but any withdrawals made after age 59 1/2 are tax-free, as long as the account has been open five years. Retirement will seem like a long way off to the child, but this is a good way to save for the future.
"Have your child open a Roth IRA and fund it with summertime earnings. They can use these accounts to save money for college, a first home -- and, of course, retirement. By socking away some of their earnings in a Roth IRA, your youngsters can begin a savings plan that can grow into a small fortune. Roth IRAs allow earnings to build up tax-free. And the tax law allows money to be taken out penalty-free in special circumstances, which include paying for college and buying a first home.”
For more financial tips on the benefits of employing your kids, check out the complete article here.
Do you employ your kids on the ranch? What lessons have you learned along the way? What tasks do you deem appropriate for children to work on in the summer months?