Dru & Madison Inc

A Little-Known Way to Pay Family and Save on Taxes

Many business owners overlook a powerful strategy that allows them to pay family members, reduce taxes, and avoid payroll taxes altogether.

You likely know the traditional approach: hire your child and put them on payroll. That strategy works well for younger children in a sole proprietorship. But once your child turns 18—or if you operate as a corporation—payroll taxes usually apply.

In the right situation, a lesser-known alternative offers a better outcome.

You can hire a family member for a “one-time project” instead of ongoing work. This structure allows you to deduct the payment at your higher tax rate while your family member reports the income at a much lower rate—often with little or no tax liability.

For example, you might pay your college-age child to design a website, create marketing materials, or complete a facility upgrade.
If you structure the work as a true one-time project—not a continuous or recurring one—the income avoids employee status and thus payroll taxes for both you and the child. It also avoids 1099 independent contractor status and thus self-employment taxes for the child.

This approach can generate meaningful savings. In one scenario, a $23,225 payment produced over $7,800 in net family tax savings.

To make this strategy work, you must follow several key rules:
• Define a clear, one-time project with a specific scope.
• Pay a reasonable, fixed amount upon completion
• Avoid hourly wages or ongoing tasks.
• Maintain simple documentation and proof of completion.
• Ensure the arrangement supports proper worker classification.

This strategy depends heavily on proper structure and ex*****on. If you treat the work as ongoing employment, you risk having your child or other family member classified as an employee or a 1099 independent contractor.

When done correctly, this approach efficiently shifts income, minimizes taxes, and keeps compliance simple.

The Solo 401(k), also known as the Individual or Self-Employed 401(k), is a strong retirement savings option for the self-employed and small business owner.

Eligibility: Solo 401(k)s are typically available to self-employed individuals, freelancers, sole proprietors, and small business owners with no full-time employees other than a spouse. This makes it
a suitable retirement savings option for independent contractors, consultants, and small business owners.
Contributions: A Solo 401(k) allows for both employee and employer contributions. As the business owner, you wear both hats in this context. Employee Contributions: You can make elective deferrals as an "employee" of your own business, contributing a portion of your self-employed income (up to a certain limit, determined by the IRS) into the Solo 401(k). Employer Contribution or Match: You can deduct an expense to the company and this allows you to further reduce your net or pass-through profit and taxable income.

Call us today for a free evaluation of your options to this type of savings and tax reducing vehicle.

Dru & Madison Inc
(212) 301-0551

2025 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2025 income taxes. The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies. In addition to saving taxes with the game of offset, you can avoid paying taxes on stock appreciation by gifting stock to charity, your parents, and your children who are not subject to the kiddie tax.

Call us to explore tax saving strategies before the year is over!
Dru & Madison Tax Advisory
(212) 301-0551

Most advisors treat charitable giving as an afterthought, a year-end tactic that’s reactive, limited, or low impact.

The Strategy
A charitable growth campaign tied to a real product:

Through this structure, clients can:
Purchase their own Series LLC
Choose to redeem, distribute, or donate products
Support vetted 501(c)(3) nonprofits
Receive a Schedule K-1 and documentation for tax purposes

When the donation path is selected, clients may qualify for:
Up to 60% AGI reduction (with 5-year carryforward)
Ordinary loss deduction of 7.5% of contribution (capped at $10K)
Tax savings of $96,500 on a $50K contribution (per CA case study)

It’s high-leverage, audit-defensible, and flexible enough to meet the client where they are.

Call us to review your current tax situation.

Dru & Madison Inc
Tax Advisory
(201) 301-0551

The OBBBA Increases the Tax Benefits of Employing Your Child

If you own a business and have children, the One Big Beautiful Bill Act (OBBBA) just made the popular “hire your child” tax strategy even more attractive starting in 2025.

Thanks to the OBBBA, the standard deduction for a single taxpayer increases to $15,750 in 2025 (with annual inflation adjustments going forward). This means your child can earn up to $15,750 in wages from your business and pay zero federal income tax—regardless of whether you itemize or take the standard deduction.

If you’re a sole proprietor or operate a spouse-only partnership, the benefits are even better. Wages paid to your children under age 18 are exempt from Social Security and Medicare (F**A) taxes, and those under age 21 are exempt from federal unemployment tax (FUTA). This allows you to deduct their wages while avoiding employment tax costs entirely.

For example, if you hire three of your children and pay each $15,750 for legitimate work, they owe no federal tax—and you could save thousands by deducting those wages on your Schedule C, lowering both your income and self-employment taxes.

Even if you operate as an S or C corporation (where payroll taxes apply), the strategy still works. While F**A and FUTA taxes are owed, you receive a deduction for those taxes, and your children still owe no income tax on their wages. In one example, a family netted $9,663 in government-paid tax savings after accounting for taxes paid and deductions received.

In short, hiring your child can create a win-win: they earn tax-free income, and you reduce your tax bill.

If you want to talk about hiring your child, please call us at 212-301-0551

OBBBA Makes Big 1099 Changes

New $2,000 1099-NEC Filing Threshold

Currently, if a business pays an unincorporated independent contractor (non-employee) $600 or more for services during the year by check, cash, or direct deposit for business-related services, it must file IRS Form 1099-NEC, telling the IRS how much it paid the contractor.
Starting in 2026 (that is, for payments made in 2026 and later), the threshold for filing Form 1099-NEC goes up to $2,000. Moreover, starting in 2027, the threshold will be adjusted for inflation each year in $100 increments. This should substantially reduce the number of 1099-NEC forms hiring firms have to file each year, relieving them of an administrative burden.

Form 1099-K Filing Thresholds

IRS Form 1099-K, Payment Card and Third Party Network Transactions, is used to report payments from thirdparty settlement organization (TPSOs) as well as debit card payments. TPSOs include payment apps like PayPal, CashApp, and Venmo; online auction or marketplace services such as eBay and Amazon; gig economy platforms such as Uber, Airbnb, Upwork, and TaskRabbit; some cryptocurrency processors such as BitPay; craft or maker marketplaces like Etsy ; ticket exchange or resale sites like TicketMaster; and some crowdfunding platforms. Now, as a result of the OBBBA, the $600 threshold will never take effect.

Instead, beginning now in 2025, 1099-K reporting reverts to the old threshold. That is, a TPSO needs to file a 1099-K only if a payment recipient has gross annual payments from the TPSO over $20,000, and more than 200 transactions with the TPSO in the calendar year