Guest EMM118 Posted January 9, 2006 Posted January 9, 2006 Husband and wife own a family business. They pay their 10-year old twins compensation of less than $10,000 (sure beats my paper route as a kid!!!). Company will establish a 401(k) plan with no minimum age or service requirements. Can these kids also defer 100% of their compensation? I'm guessing the answer is yes, provided the compensation is justified. Any thoughts are greatly appreciated. Ed
david rigby Posted January 9, 2006 Posted January 9, 2006 How does one defer 100% of something that is subject to FICA? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest EMM118 Posted January 9, 2006 Posted January 9, 2006 Clearly, the children's compensation would be subject to employment taxes.
Guest Ben Wells Posted January 10, 2006 Posted January 10, 2006 The children need to be performing services that are (at least arguably) worth the compensation being paid. Otherwise you have a deductibility issue.
Lori Friedman Posted January 10, 2006 Posted January 10, 2006 Everyone's probably familiar with the most popular rationale for compensating young children -- put their cute little faces in the business's advertisements. Lori Friedman
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