Does it pay to work for family members?

Question

My husband works with his father, which owns his own company. As of right now, my husband is responsible for his own taxes. Now his father is talking about putting him on salary taken out taxes, and at the end of the job, and after overhead, giving a bonus. My husband works alot of hours as of now, and makes a good living for our family. I have tried to look online about small businesses, so maybe I could learn alittle more about it so I would seem so dumb when he talked about all this in front of me. But, of course it all cost a pretty penny to take this courses. So if anyone has any answers that I could use I would appreciate it.

Answer 1

The issue isn't really anything to do with working for family - sounds like it's more regarding working as an employee rather than as an independent contractor.

An independent contractor typically gets paid by the job, and will pay his own taxes rather than having anything withheld. The contractor pays both the employee and employer halves of social security, so pays an extra 7.65% over what an employee pays, but also might have a number of items for expenses that they can subtract from their income before figuring their tax.

There's no way to tell which would be better for him as far as hours worked or total after-tax income.