My husband is a sole proprietor in CA. He hired our 13-year-old son to work at his home office and started paying him with personal checks. Do we need to submit any forms to IRS to report this wage? How do we send a W2 form to our son at the end of the year?
Hi There
Hiring a relative to work in your business is allowable as long as the duties are ordinary and necessary for the business function. From a burden of proof aspect, the child should submit a time sheet as evidence of hours worked and duties performed to the business. From there corresponding pay should equal fair market value of service rendered.
A payroll service can prepare all necessary employment tax forms and W2, or you can manually prepare employment tax forms. See Link below:
Also your state of business operation might also need employment tax forms. Please see state website for more information.
Also wages reported to your child might require a tax return for the child.
who-needs-to-file-a-tax-return
For delivery, since child and business occupy same general location. You can leave the W2 at the business office for the child.
Hi There
Hiring a relative to work in your business is allowable as long as the duties are ordinary and necessary for the business function. From a burden of proof aspect, the child should submit a time sheet as evidence of hours worked and duties performed to the business. From there corresponding pay should equal fair market value of service rendered.
A payroll service can prepare all necessary employment tax forms and W2, or you can manually prepare employment tax forms. See Link below:
Also your state of business operation might also need employment tax forms. Please see state website for more information.
Also wages reported to your child might require a tax return for the child.
who-needs-to-file-a-tax-return
For delivery, since child and business occupy same general location. You can leave the W2 at the business office for the child.
Hello wubeibei,
Yes, it is a good tax saving strategy to hire kids. Yes, you would need to issue a W-2 and send a copy to IRS as well.
You could use this software to generate and file W-2's:
Here is an IRS article with additional info:
Thanks for participating in TurboTax's Ask the Expert event today. I hope this information was helpful!
Have an amazing day.
AR (CPA 10+ years)