Let me preface this by saying we are a Mum & Pop shop. We started our business from nothing, going only by what felt right, and avoiding debit. We had no other business knowledge aside from my years working as an on site service technician in construction/ maintenance and the work orders that I filled for those jobs.
Currently we make enough to survive. We are able to pay our business bills, make our very meager mortgage, home utilities and our single car payment. We live a very financially conservative life and do not carry any debt aside from one car (soon to be paid off) and our home mortgage.
We are happy, but would like to work less or at least not be physically tied to our business each day, which might allow for one or both of us to pursue other employment or business opportunities.
I have the perfect employee in mind. Have known this person for 20 years. They are trustworthy and dependable.
My concern is this: We make just enough to pay our own bills now. If we hire an employee their salary will come directly out of our salary. Does the IRS offer some offset tax credit to help? Will we get to write off the employee's pay as "money never earned" thus dropping our end of year tax burden?
We have a business accountant who does our books. Last year, after all was balanced and deducted he showed us to have a yearly income of $17,000. We know that we make more than that, or we would never survive. He is an honest accountant and does no shady work, so all deductions are legitimate. That said, Our business makes up our primary income, with a tiny bit of secondary from a rent house that my wife owns (still paying mortgage on it) and some land that we sold. Other than that, its just standard business deductions (we did not meet the itemization threshold) and standard personal deductions for childfree married couple.
The way I'm calculating it, if we pay minimum wage $7.50 we will pay approximately $277.50 each week of work, or $1,202.50 per month. That's about half or more of our actual income.
Are we just not at a point where we can consider hiring, or am I missing some IRS benefits that we can get by hiring an employee?
Final note, this person has a felony conviction, and served some time in prison… I Think. It is my understanding that they got in an accident caused by DUI. No one was injured but the crime is still a felony, I think. Does this qualify this person for a tax credit for "second chance" workforce hiring?
Thanks for any info.
EDIT: We are currently registered as a Sole Proprietorship. I believe that this makes a difference? would we have to change that if we hire an employee? is that a "good change" or a "bad change"… meaning will it raise or lower tax burden or tax liability?
EDIT2: Our business shows a higher, more reasonable gross income. Our personal income was what our accountant listed at $17,000 after deductions.