A Yes. You may deduct reasonable wages paid to a minor child for services actually rendered as a bona fide employee in conducting a trade or business. (IRS Revenue Ruling 72-23) It gives more credence to a legitimate employer-employee relationship if the employer states responsibilities in writing. A previous Tax Court case approved a deduction for a child as young as seven years old. (Eller, 77 TC 934)
Tip: A businessperson cannot deduct a personal allowance paid to a child just for doing certain chores. To qualify for deductions, the child must actually render services to the business.
- EEOC rule allows coordination of retiree health benefits with Medicare
- Is it possible to reduce everyone's hours without running afoul of the law?
- Make sure written employment contracts exclude oral promises
- Send tailored e-mails to deliver actionable health info
- Leave contracts to the experts: Have attorney draft documents detailing benefits