Originally Posted by Unregistered:
Tom, You once told me that I should just claim the amout paid to my child under activities expense? Is that correct? If that amoutn goes up higher, would that cause an audit?
Do I need to fill out any special tax forms for my paying my child? She is 13 and over this last year, I have paid her $2500 to work for me. I gave her SOME cash, but the rest was things that were purchased for her. She works for me to pay for her dance classes mainly.
If you are paying your child and following all the tax rules, then putting this expense under "Activities" is fine. The reason I say this is to not draw attention to this because the IRS is suspicious of providers hiring their own children and you may be more likely to be audited if you put this expense under "wages." I don't think paying your 13 year old $2,500 in a year is likely to cause an audit, assuming you made a profit of at least $5,000. You can compensate her pay paying for her dance classes. Be sure to keep accurate records of when she did the work, that the work was related to your business, and that the amount you paid her comes out to be no more than federal minimum wage ($7.25 per hour). I use the federal minimum wage as a guideline for your because of the age of your child. Older children could earn more per hour.