Absolutely! But be careful……..

It doesn’t matter if you are a corporation or are a sole proprietor, paying your kids can be a tax-smart way to keep money in the family while teaching them some grit and work ethic.

Here’s how it works for 2024:

Pay Salary:  The kids need to actually work in the business (admin, prep, packing, social media, etc), and you can pay them a reasonable amount depending on the type of job and skill level.  Compare the rate to what you would pay someone else doing the same job.

Document it: Keep track of the hours and duties they are working incase CRA asks for it. Make the payments on time.  Follow the exact same documentation you would for any other employee.

Set up the Payroll Account with CRA: you will need to activate it.  Decide on the frequency of pay, weekly, bi-weekly or monthly.  Be careful with the deductions and sending it to CRA, if your late they will hammer you on penalties.

How Much Money are they making? Look at the maximum amount they can earn in the province without paying any income tax.

Don’t Pay Dividends: Corporations paying out dividends can get complicated for kids under 18 years old and likely to trigger the Tax on Split Income (TOSI) rules, which means high taxes! For kids above 18 its possible but kinda messy.

Employment Insurance (EI) Exemption: If the kids are working in the business because they are a “family member” they might be EI exempt, meaning no EI deductions are needed. This saves the child and corporation additional costs.

File Tax Returns: Even if your child’s salary is below the taxable amount, they may still want to file a return to accumulate RRSP room.

This is the exact exercise we went through with a client last week.  Figuring out what his kids can do in the business, how to document it, and finally setting up with CRA.

DM me if this is the kind of advice you want from your accountant :)

❗ Disclaimer: I’m a CPA, but I’m not your CPA. Always consult with a tax advisor to ensure you’re compliant with the latest tax rules and to tailor a plan to your unique situation.  These are also Canadian tax rules.