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-NEC (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:
- Click on Tax Home from Left Side Menu.
- Click on Income & Expenses from main menu.
- Scroll down till you see the section titled Self-Employment. Click on Start next to it.
- If you have already entered your business information, then click on Review/Update.
Enter the expense under 'Contract Labor' if a 1099 was issued, or 'Wages & Salaries' if a W-2 was.
If you paid them over $600, you will need to issue them a 1099-NEC, if you don't want to consider them employees, although there can be advantages to that.
Here's more discussion on Hiring your Children as Employees and Form 1099-NEC.
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