<p>“The question was whether it was legal for the parents to employ the adult child, not whether it is profitable.”</p>
<p>Exactly. If the employment of the kid is a SHAM in order to milk the govt of substantial subsidies it is not legal. I think we both know what is going on here. The parents don’t expect any work from the kid; they are doing it so the kid doesn’t have to pay for insurance.</p>
<p>And it does matter if the salary is paid to a kid. It is called a related-party transaction and the IRS will scrutinize these transactions in much greater detail if they suspect there was an ulterior motive for the transaction.</p>
<p>GP, as someone who has legitimately employed my kid to perform specific duties for 7 years until this fall, I don’t think you can assume that folks like to part with cash and not get any actual work out of the deal :)</p>
<p>My son was part time payroll throughout HS and 1099 part time telecommute throughout college. </p>
<p>In our case, we’re a c-corp, so this could be viewed as “tax avoidance” since obviously it was pretax expense in so far as it reduced doubletaxed dividends. its a pretty common and legal tax strategy, and it certainly DID work to everyone’s advantage, including said kid, who learned how to work and who, like CFson, has some neuroatypical-style disabilities that can interfere with performance in some work environments, though to date he’s now been able to mitigate that.</p>
<p>Now that he’s employed elsewhere in another city and I’ve had to replace him, its also clear I was getting a good deal :)</p>
<p>At any rate, this is perfectly legit and useful on any levels. My only note is that if its 1099 income, to expect and plan for 13.5% self-employment tax; to set up quarterly payments and to get into the habit of keeping track of receipts for related expenses.</p>
<p>On another note, TPG, re HRA debit card, it is usually to offset your deductible and/or cover your share or cover things that your plan may not. Eg. A company will set up an HRA in combo itch a high deductible plan because it will keep premiums lower, reduce out of pocket expense for employes, and is tax advantaged (pretax exp).</p>
<p>I don’t believe this is accurate. There are rules in hiring a relative and deducting it as business expenses. Any pay above market place wage is regarded gift, I believe. Of course, people can fudge what market place wage is for the work they get ,which I am sure is priceless when your kid is working for you and you wouldn’t consider it fudging, and let IRS figure it out as many may do. They may gift any amount upto $14K or $28 but that won’t be a taxable income to the kid and won’t help.</p>
<p>"And it does matter if the salary is paid to a kid. It is called a related-party transaction and the IRS will scrutinize these transactions in much greater detail if they suspect there was an ulterior motive for the transaction. "</p>
<p>I know a bunch of people who do it today. IRS has never cared. They only care whether people have paid taxes. The ones who did get into issues - not paying SS taxes for their nannies.</p>
<p>There are many small businesses and farms which pass from one generation to another. I have an A/C guy who always shows up with one of his 2 sons. He has no other employees.</p>
<p>kmcmom - We only started it for 2014 for the first time and it mentioned covering deductibles. Not having this before, we have assumed it is an ACA move. </p>
<p>Since the company built clinics on the major sites, I assume that is how they want to cover routine care.</p>
<p>KMC, we are talking two different situations. One is paying a kid for no work to qualify for a large subsidy. Much of the talk on this thread has been how to manipulate the tax code to get larger subsidies from the govt. Some of of it is legal; this maneuver in all likelihood is not unless you believe all of a sudden the parents had an epiphany to hire the kid to do some work, which for some reason they had not thought of prior to the availability of the subsidies. </p>
<p>In your situation, it could be illegal if the IRS audited your corporation and concluded that your son did not perform the work and the payments your son received were improperly taken as a deduction. Related-party transactions, like paying kids, are looked at more closely for the obvious reason. For instance, the IRS agent could conclude you were improperly taking business deductions for your child’s expenses which you would have paid from your after-tax income in any case. However, it sounds like your kid really did work for the pay he received and the payments were commensurate with the level and the amount of work performed.</p>
<p>Whether what you did was legal or in the example of attempting to qualify for subsidies depends on the circumstances. To say there is some blanket rule that covers all exigencies is incorrect.</p>
<p>I am not so sure. I know a bunch including me who have paid people for a long time. IRS has no clue who is worth what. My company at one time used to pay 20k for a board member showing up for one meeting. I always wondered why someone’s 2 hours is worth 20k.</p>
<p>He or she with the best accountants and knowledge of tax code and the law will always win this game with the IRS.</p>
<p>I do not even take all the personal charitable deductions I am entitled to, because I am too afraid of being audited. Dumb, I know. I would rather err on the side of reasonable than face that agony. </p>
<p>This tax system is rife with ways to work it to one’s advantage. </p>
<p>I would have hired one of my kids if I had enough income to do it. My business isn’t that big of a revenue generator after expenses and taxes to slice another share off the top. If it was, you would better believe I would do it.</p>
<p>I don’t know if IRS knows who is worth what or not. I’d guess there is a broad range and some leeway that is exploited by business owners. That doesn’t make it legal. They may not get caught but that doesn’t make them honest. Some people may not want to be that honest. For the corporation paying $20K to a board member, it may be legit. If not, they may not be caught now but when they get caught for other bigger offense, this indiscretion may be added to their list of wrongdoing. If I ever get caught with anything, I’d prefer to be squeaky clean in all other aspect. Wouldn’t present me favorably in spite of one big slip?</p>
<p>" For the corporation paying $20K to a board member, it may be legit. "</p>
<p>If you are not aware, that is going rate for board members of large companies to attend a meeting. They earn closer to 100k annually for being board members in cash and stock for about 5 days of commitment.</p>
<p>I question whether anyone’s time is worth that much. Where is the measuring stick for IRS to tell them yes or no? Boards are filled with Cronies who are essentially yes men.</p>
<p>I don’t think IRS has a measuring stick. They use market place going rates. I am sure what you say about board members is true. We live in an unhealthy wage market. I guess IRS doesn’t take on that tho.</p>
<p>Of course you can hire your kids. Look at all the businesses that do. And of course, in some circumstances, some of their “pay” may be a patent abuse of the way things are supposed to be. (I worked for a guy who did this is. A real shark.)</p>
<p>GP, guess it doesn’t matter now, but your original comment to the question of legality was that the biz would need to show enough profit to cover this kid. Ie, you can’t take a loss on something you can’t defend. (Or, you shouldn’t.) </p>
<p>We need to lighten up for a moment. Not that I suppose we will. :)</p>
<p>Big Boards cover board members at big $. You can look into what ex-Presidents get. [I always wanted to be a board member at these lucrative rates, Yee Ha. I didn’t get paid a dime, for a local non-profit. But they did let me bring my kid on, as a junior member…priceless. And not relevant, here.]</p>
<p>Btw, I don’t think it’s “marketplace rates.” I think it’s “fair and reasonable” - which translates to “defensible.”</p>
<p>Thank you to several people that replied to my “Silver Plan dilemma” All of the info sheets I looked at showed the exact same copays, coinsurance, deductibles and out of pocket max for the 3 plans, “Advantage”, “Select” and “Value.” There does seem to be major differences in the networks. From the BCBSNC webpage (I could not find this info on the healthcare.gov website)<br>
</p>
<p>It is still hard to determine the exact differences, and what is the difference between a “deep broad network” and “our largest network” ? At least the plans are described differently, and not all the same. </p>
<p>I believe our doctors sent us a letter saying they were not going to participate in the Value plans so I think we can rule that one out. </p>
<p>So I call the BCBSNC customer service number this morning, Tuesday Dec 10 at 9:30 and a recording tells me they are closed for a departmental event. Can I get a “what the freak???”</p>
<p>Which is hilarious considering when I brought up the income v assets issue as yet another way the older are stealing from the younger generations, I was laughed off the thread by the california defense team. Of course, they compared the new graduate to the early retiree and acted as if there was no scam. I say, what about the 30 year old with two kids who has to pay based on income who is being procluded from EVER getting any assets?</p>
<p>It’s a sad state of affairs the way we nonchallantly steal from those who are younger than us.</p>
<p>A few times a week I come to this thread hoping to find real data from real people signing up for health care for next year. Instead I find 90% ranting and raving over obscure beefs. People who are gleeful when things go wrong, vague threats about our liberties, etc. Our representatives need to pull together to make this work for all of our sakes. It’s law, so come on and get practical. Every major step forward in our society comes with this sort of angst and disorganization. We need to recognize what we all stand to gain from this mess and also what has to go. Most of what needs to go are the complexities added by initial compromises. We’re killing ourselves by letting the insurance companies still rule. We need to stop letting the insurance companies and employers use the ACA as a scapegoat.
Remember the KISS principal. We need to simplify, simplify, simplify.</p>
<p>preironic, I am sure whatever you are looking for is here. We are approaching 10,000 posts and naturally we veer off. </p>
<p>PG, That’s also my main interest. If or how the wealth is being redistributed through ACA? Is it forward looking taking care of the young and solidifying the middle-class?</p>