Every once in a while, we find ourselves working with a situation where owners of businesses are paying their children for doing legitimate work, but their children are not on payroll.

In many cases, especially if they have adult children that are working for them - 18 and above - it's going to matter whether or not they put them on payroll because they would get a tax deduction for paying their children and the children could potentially qualify for other government programs because of their earnings. 

In this example, we are under the assumption that their children are actually doing work, which would definitely be a requirement. They have to do work in the business for it to be a legitimate expense. That takes away from the taxable income of the company, which then saves the parent tax dollars.

In a case that recently happened, the business owner’s children went to work and their father paid them under the table, expecting them to not have to pay any taxes. 

What actually ended up happening is that - when we changed everything over to follow the laws - he got a tax deduction of about $24,000 a year. 

They actually got a tax refund as well, because now according to the government, they had a job and they were getting the working income tax benefit supplement.

We ultimately saved this family somewhere close to $12,000 per year.

Don't pay your people under the table if you think that you're doing them any favors. They're not doing you any favors when it comes to you paying your taxes.