HOW CAN HIRING YOUR KIDS HELP YOU SAVE ON INCOME TAXES?

Hiring your children does not raise a red flag with the IRS, but you should document your children's salary and services provided to audit-proof your tax return. To do this, keep a time sheet showing the date, hours and services provided by your children, and write them a check for their wages.

Note: You may have heard of the "kiddie tax". Earned income, including wages that you pay your children, are not subject to the "kiddie tax" rules, regardless of their age.

Example: In 2007, you can pay your child up to $5,350 (the standard deduction amount in 2007) before either one of you would incur any taxes. Suppose you are in the 28% tax bracket and you pay your 15-year old son $5,000 over the course of the year to perform office related tasks.

You get a business deduction for the wages paid to your son, saving you $1,400 (28% of $5,000). In addition, this reduces the amount of profit that is subject to self employment taxes (15.3% of $5,000 = an additional tax savings of $765). Your total tax savings in this example is $2,165.

Since your son's earnings are less than the standard deduction amount, he does not owe income taxes on his earnings. In addition, because your son is under age 18, you do not have to pay Social Security, Medicare or unemployment taxes on him like you would with a regular employee.

Action: If you have children between the age of 7-17, consider putting them on the payroll. You will need to keep time sheets showing the dates, hours and services performed. You should also write them a check to substantiate the wages.

Filing Guide: You will need to file quarterly payroll tax reports (Federal Form 941, state payroll tax forms) for your children (even though no taxes are due). In addition, you will need to file a Form W-2 for your children at the end of the year.

Sources: IRS Publication 15, Chapter 3, Family Employees

Scharf also emphasizes the importance of truly listening to the particulars of each client's personal situation, and cites education as a crucial factor in his company's effectiveness.

"We educate clients about the entire investment process and not just about our own products and services," he says. When a client approaches Scharf Group for the first time, they are introduced to a team of staff members for a discussion of their needs and how the Group's services can best assist them in reaching their goals. Though this initial consultation is complementary, Scharf is insistent about its value. "We need to see if there is a fit," he explains. "Will the client benefit from us and vice versa? We're looking for a win-win relationship."

Scharf is passionate about what he does, and thrives on conveying that enthusiasm to others. He finds personal motivation and inspiration in helping people achieve their financial goals, and notes "When you love what you do, even working is time for yourself." That kind of enthusiasm pays off, and 99% of Scharf Group's clients come to them by way of referral.

Rena Margulies, vice president of the mortgage division, reiterates Scharf's sentiments. "There's a great camaraderie at Scharf Group," she notes. "It's a very team-oriented atmosphere, and it's a pleasure to be part of that. And when I'm productive and happy, the people who benefit are the clients."

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