How do I report income that I paid my children to work in my business?

[user50352]

My children are now old enough to work in my business and I have been paying them for the past year.  They are paid way under the maximum amount, but I just want to know how to report that on my tax return?

[AamilD]

If you paid your children to work in your business, then your business would be reporting an expense for it. Your children will be reporting that as income on their return.

Did your business issue your children a 1099 (if contractor) or Form W-2 (if employee). If yes, then you can take that as a deduction on your business return as salaries and wages and your children will input the 1099 or Form W-2 in their respective returns to show that income.

To report salaries and wages on your Schedule C, please follow the steps below:

1. Click on Tax Home from Left Side Menu.
2. Click on Income & Expenses from main menu.
3. Scroll down till you see the section titled Self-Employment. Click on Start next to it.
4. If you have already entered your business information, then click on Review or else Add another line of work. Then you will be asked if you paid wages & salaries and you can click Yes on it and enter the information.

[VolvoGirl]

Under the maximum amount for what?  If you paid them as independent contractor you need to give them a 1099NEC and they need to file their own returns and pay self employment tax.   Or did you give them a W2 and pay payroll taxes?