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Issue Number: Tax Tip 2022-151
Understanding taxes when a family member signs the paycheck
Many people work for a family member, whether it’s a child helping out at their parent’s shop or spouses running a business together. When someone is employed by a family member, the tax implications depend on the relationship and the type of business. It’s important for taxpayers and employers to understand their tax situation.
Married people in business together
Children employed by their parents
If the business is a parent’s sole proprietorship or a partnership in which both partners are parents of the child:
If the business is a corporation, estate, or a partnership in which one or no partners are parents of the child:
Parents employed by their child
If the business is a child’s sole proprietorship:
If the business is a corporation, a partnership, or an estate:
If the parent is performing services for the child, but not for the child’s trade or business:
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