Paying your children’s wages in pizza won’t get you a tax deduction. A mother ran her own staffing, consulting and tax preparation business. She hired her three children, ranging in age from 8 to 15, to help her with jobs such as shredding, stuffing envelopes, copying and shopping for supplies. She included the hours her kids worked on time sheets and issued them W-2s.
But instead of paying her children in cash, she bought them meals, including pizza, and paid for tutoring. She tried to deduct the kids’ “wages” as business expenses, but the Tax Court didn’t buy it. In its view, the services that the children performed were more for parental training and discipline than part of the typical activities of employees, so it denied her write-off in full (Ross, TC Summ. Op. 2014-68).