@ocramolop wrote:
Thank you. Sounds dicey still. I’m a sole proprietorship. I wouldn’t take child car tax credit as that would seem to emphasize that her role is as nanny/baby sitter and not as employee. I’m looking for ways to reduce taxable income legitimately by reasonably and legally paying my children as employees, as you referenced in your response. It seems logical that I can pay her as an employee to do the work, but I see how it gets complicated if the childcare is a benefit to me, the owner. Clear as mud.
One extra point, I somehow got the idea you were an s-corp. If you are a sole prop, and you hire your child under age 18, you don't have to withhold social security and medicare from their wages or include it on their W-2. See here,
https://www.irs.gov/businesses/small-businesses-self-employed/family-help
Your child does need to provide legitimate services to the business, something that you would pay someone else to do if they were not your child, at the same wage. (If you are a dog walking service and would pay an unrelated employee $12/hour, for example, you can't pay your child $30/hour, but you also can't pay them $5/hour.)
The idea of wrapping child care into it is too much for me to have a decent opinion about except to ask a real expert.
