Today TaxMama hears from Lena in Virginia, who wants to know. “In order for a family member to be paid wages, do they have to perform the actual task on a regular basis? Or is it sufficient if they are able to perform the task when needed?”
Is the family member being paid by a business, where a deduction will be taken for the wages paid?
If so, you’d better be VERY careful to document the work and time spent on it. Or whatever other criteria you are using to pay the family member (i.e. commission, percentage of completion, etc.).
You can’t just give someone a salary if they are not doing any work. IRS looks upon that as tax fraud and they take it very seriously.
Please read Chapter 9 of Small Business Taxes Made Easy for more details.
If the wages are being paid for domestic care, and being on call in case of an emergency, you might be able to establish a salary. It might qualify for a medical deduction, if the person needing care is disabled. But, again, be careful. If there is rarely a need for the service to be performed, I would not be taking a medical deduction – or any deduction at all.
And remember, you can find answers to all kinds of questions about paying family members and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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