By Sarah Mahoney
Small-business owners already know there can be tax perks to hiring your teen: You won't have to pay Social Security and Medicare taxes on her earnings until she turns 18, and her salary is a legitimate business expense for you according to current Internal Revenue Service guidelines. (Go to irs.gov/businesses/small.) But all parents are potential employers. Is there a big project your teen can handle? Power washing the house? Painting a deck? Reorganizing the basement? Rather than paying him an hourly rate, think about setting an agreement like any you'd make with an outside company—many contractors, for instance, get a third of the fee to start, a third midway through, and a third on completion. Establishing a payment schedule, finalizing a timeline, and negotiating a project fee may make your teen feel more invested in seeing the job through and can minimize misunderstandings and the drama they create. (If you spell out all the terms of your agreement carefully in writing, you're better covered against disputes). And don't limit yourself to cash payment. If money is tight, your teen can work for extra privileges—skipping some other chores, or banking a later curfew or more car access, for example.