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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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My wife, myself and a 3rd person are equal members of an LLC.

Customer Question

My wife, myself and a 3rd person are equal members of an LLC. Can we pay our children (and those of the 3rd person) without paying the customary payroll taxes and filing a W-2?
Submitted: 8 years ago.
Category: Tax
Expert:  Ed Johnson replied 8 years ago.

Dear dad,


Unforunately not. The IRS takes a very hard look at hiring children as employees of pass through companies. (LLC, and S) as well as sole proprietorships.


You can pay your children but the following must be true:


1. They must be legitimately working for the company.

2. They must be paid prevailing wages

3. As employees you will be required to withhold SS and MC taxes.