Tax Tip Series: Tax Advantages to Employing Your Children

Children under the age of 18 who are employed by their parents are exempt from FICA tax (Social Security and Medicare) on their wages. It is important to note “employed by their parents” means that their parent(s) have a sole proprietorship, single-member LLC or a partnership in which only the parents are members. Small businesses that are incorporated entities or any entity that includes a non-parent member do not meet the exemption. Additionally, children under the age of 21 who are employed by a sole proprietor parent are also exempt from FUTA (Federal unemployment tax).

By employing your children, you are can shelter some income. A child, who is paid by the business and receives a W-2, is entitled to his own standard deduction of $5,950 in 2012. Thus the first $5,950 paid to the child is tax free. The next little bit of their earned income is likely taxed at the lowest tax bracket, Therefore, if the parents are in a higher bracket, this should save some money for everyone.

Wall Street Week Ahead for February 20, 2011

For the week beginning February 20, 2012, Research Analysts Mark Bendinelli, CFA, and Troy Harmon, discuss the economic releases, including Wednesday's January Existing Home Sales report and Friday's New Home Sales Report. The Analysts also touch on the expected earnings results from Wal-Mart, Home Depot, Kraft Foods and Hewlett-Packard.

Wall Street Week Ahead for the week of February 13, 2012

For the week beginning February 13, 2012, Research Analysts Mark Bendinelli, CFA, and Troy Harmon, discuss earnings season's final stretch and Wednesday's release of the Federal Reserve's minutes from the last monetary policy meeting. The analysts also provide their expectations for the Producer Price and Consumer Price indices released later in the week.

Tax Tip Series: Increase in Tax Audits and Prepaid Audit Services

In past years, we have seen an increase in individual tax audits. The most recent statistical data released by the IRS for the tax year 2010 shows that during that year, more than 1.58 million tax returns were examined by the IRS, focusing on more high-income taxpayers than ever. Audits of individuals with income of $200,000 or more increased almost 6% from 2009, while audits of individuals with income of more than $1 million increased almost 15%.

To avoid the risk of an audit, many of our clients tell us to not include anything on their tax returns that could be a "red flag" to the IRS. As a firm, we believe if you are eligible for the deduction then you should take it. For example, if you really gave a lot more to charity this year than you did last year, then you should take the additional deduction. Or if you are hurt and have a large amount of medical bills, you should be entitled to the deduction on your return.

If you save good backup—actual, legible receipts—for your deductions, you should not worry about getting a tax notice requesting to see your documentation.

Tax Tip Series: Individual Federal and Georgia Taxable Income Differences

It's a good idea to refresh ourselves of the differences between Georgia State and federal taxable income so that we are vigilant and don't miss any opportunities afforded us. Many states do not automatically adopt federal tax law changes. Georgia, like many states has certain peculiarities relative to their own economy and tax incentivized structures.