(Revised 10/00 ML #2629)
Wages paid to family members are included in the IRS forms as a business "expense" under the heading "labor hired." LIHEAP will allow this business expense.
However, with the exception of the earnings of dependent children, the wages paid to family members must be counted as part of the household income and treated as a source of income separate from the business income. The IRS forms identify the amount of "labor hired" but do not separate outside labor hired from wages paid to family members. The household will need to identify and verify the amount paid to family members (cancelled checks, W-2 forms, bank books showing transfer of funds).
"Legitimate wages" paid to family members who are dependent children shall NOT be counted as household income (415-25-05-50). To decide if the "wages" are "legitimate" and not merely a tax break, the following criteria are suggested:
- The work should be a necessary part of the business which would require the time of an adult family member or the hiring of outside labor if the dependent child did not perform the work.
- The amount should be reasonable for the type and amount of work performed.
- The dependent child should be of a reasonable age and skill level to perform the work.
