Should you Pay your Child for Working on the Farm? Absolutely!

If you grew up on a farm, you are well aware of the fact that children of farmers do a lot of work. Among other things, you may have milked cows, baled hay, or drove a tractor. One thing you probably never did, however, was ask for a paycheck at the end of the week. Turns out you probably should have, though.

Many farmers and ranchers are surprised to learn that the IRS will consider anyone who works on your farm to be an employee. And this employee can live miles from the farm or in the farmhouse itself!

One benefit of paying your children a wage for working on your farm is that wages are tax deductible. Another benefit is that you do not owe
social security tax on wages paid to your children under 18. While it is always best to check with an accountant, certain things like clothes and shoes that are required to work in the fields or around the farm may be tax deductible, as well.

Here are some additional tips if you decide you would like to hire your children to work on the farm:

1. Keep track of the hours worked and the specific tasks performed.
2. Don’t overpay. The IRS is not going to accept that your child makes $150 an hour feeding chickens. Make sure the pay rate is reasonable and in line with what you would pay anyone else to do the same job.
3. Give your child a paycheck, not cash. And before your child decides to go blow his or her paycheck on a new phone, deposit it in a bank account that has his or her name on it. This money can be an IRA, a college savings plan, or a custodial account that you have control over until the child turns 21.
4. Make sure you fill out all the same forms that you would for any employee. As an employer you must make sure that you have an Employer Identification Number, as well.

In the end, hiring you children makes good financial sense. Just make sure you don’t overlook the details that come with hiring any employee. That way you and your child will enjoy a long and productive working relationship.