If you have a business, you can hire your kids and can invest the earnings to get benefits for college. I will discuss some advantages of using a Roth or traditional IRA, depending on the child’s earnings, over the next few days.Did you know your child can withdraw Roth or Traditional IRA funds without penalty to pay qualified higher education expenses such as tuition, fees, books, supplies and room and board.Tomorrow I will discuss some more advantages of hiring your kids and using an IRA for college.
Brian’s Tax Musings
If you use your personal car for business purposes, how can you write off your expenses? If you have another entity (S or C Corp or LLC) you are supposed to submit an expense report to the entity either for mileage (51 cents a mile) or your actual expenses for the mileage, which can be difficult to calculate. If the entity pays your auto bills for you, that is a personal payment, either a draw or a distribution or shareholder loan depending on the entity. It is better to submit and then reimburse rather than have the entity pay; just for clarity and having the documentation directly tie to a check.
Brian’s Tax Musings
If you plan to operate your business as a corporation, whether a C or S Corp, just remember that you must treat the corporation as a separate entity. This means you must have a separate bank account, get a taxpayer identification number and then pay all bills and collect income through the corporation. Make sure you keep corporate funds separate from your personal funds. Also keep good records to justify all your business deductions. The IRS may disallow the corporation for tax purposes if you don’t treat it as a separate entity.