Employing your own kids this summer?

If you plan to employ your own kids in the family business for the summer and want to take a salary deduction for the wages you pay them there are some things you should know. Their time must be recorded on a time sheet and it must be credible. In a 2016 U.S. Tax Court case, the court disallowed a salary expense deduction to a parent’s business because the time sheets submitted for a stepchild were not credible.  To make sure that you comply with what the IRS needs, follow these few simple rules: have the child complete a W-4 form,  record hours worked in the same manner as other employees, pay fair-market value for their services, and provide them with a W-2.