small business

Don't Pay Children Large Bonuses in Your Family Business

If you run a family business, employing your children is a good way for them to earn money while effectively "shifting" income from your high bracket to the children's lower bracket.

However, the work must be "real", recorded, and at a reasonable pay rate.

In the case of Embroidery Express, LLC vs. Commissioner, Internal Revenue (T.C. Memo. 2016-136), the business owners paid their children relatively small wages during the year, but then gave the children very large bonuses at year end.


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