rn Wednesday, June 17, 1998 — North Shore News — 23 north shore news & BUSINESS Pay for kids’ work but not child’s play PAY your kids (and other family members) to work for you. But pay careful attention to the details or Revenue Canada could turn tax savings into double tax- ation. Let’s say you pay your three children $4,000 a year each ro we ork i in your business, whether it’s revenue Property (from a basement suite up), a home-based sideline, profes: sional incorporation or muiti- million-dollar company. _ That’s money you would otherwise. have earned. You/the business deduct what you pay the kids, who pay lit- tle or no tax. Depending on your tax bracket, this income- . Splitting could save you (if . you pay the kids $12,000 a year) between $3,000 and $6,000 tax a year ~- $15,000 to $30,000 over five years. The rule is to pay the kids (or other relatives in a lower tax bracket whom you sup- port) what you'd pay an out- sider to do the same work. So if your 12-year-old is comput- er literate, could you pay her or him $25 an hour if that’s what you'd pay somebody else _todo the job? Perhaps, bur be careful. Don Goodison, a partner of Kemp Harvey Goodison, certified general accountants, writing in the CGA Magazine, warns one family probably . ended up paying around $25,300 tax on $25,800 income when their income- splitting went awry. The parents owned a con- "”* struction company and paid their son and daughter, who” were cight‘and six respectively, . $6,500 3 year cach to run errands, help clean up the building yard, restock sup- ”. plies; do some photocopying and other minor office chores, sort nurs and bolts and help clean the trucks. But the parents didn’t - keep atime sheet, a require- pent for other employees. They paid the children only at the end of the year (instead of . regularly like the other employees). The cheques were then endorsed back to . the parents and deposited to the company as shareholder ~. loans. Revenue Canada (Lj disal- lowed the business deductions and (2) added what the chil- . dren had been paid to the parents’ incomes —~ double taxation. The court dismissed the parents’ appeal, saying the amounts paid (and work ostensibly dane) were unrea- sonable tor children that age and were simply plugged in at the end of the vear to save tax, The court added some provinces have child labor Jaws prohibiting children thar young from being put to work. Income-splitting can save tax, but Pesho Goodison’s rules, and put the amounts Grenby questions in this column as RPO, Burnaby, B.C. VS] advice: “Provide a job deserip- paid into separate accounts or Mike Grenly is a columnist space allows but cannot reply 5G3: e-mail mike@qrenby. com tion, pay reasonably and regu- investments for the children.” and independent personal personally — contact him at and see previous columns at larly, follow any withholding — Coprrials: 1998 Mike financial adviser: he'll answer P.O. Box 50029, South Slope Mike's website, wwwgrenty.com Semi-Annual Shoe Clearance 20% to 40% off Women's, Men’s, Children’s and Athletic shoes in selected styles by Nine West Kenneth Cole Aerosoles Liz Claiborne “Enzo Angiolini Florsheim Nunn Bush Nike Adidas French Toast OshKosh and more. Styles vary by store. 25% off women’s 7 | selected handbags, Up to 40%. off* belts, scarves, women’s 25 to 40% off hats and hair’ selected fashions men’s fashions accessories ' Liz Claiborne Jones New York Selected styles of Tommy Hilfiger Guess Nine West Liz Claiborne eo Bianca Nygard Polo Ralph Lauren Nautica~-” Esprit. Echo Jones New York: Jax I] Louben Elisabeth —_ Claiborne Retreat: Nike : TanJay Alia Kates Elite oe Russell Athietic: oe a : ' Gasual Connection . cape 26h off The Wor Connection Attitude Up to 40% off. selected denim & eee selected fashions: sportswear . , forkids Calvin Klein Ocean Pacific : 3 Reebok!” Nike Converse Osni