Well, first off, is it non-employee compensation or misc income(Box 3)? Because they are or can be taxed differently. I dont know the details of the engagement, but this is where i would say consult your tax advisor. Plus you know you have to fill out form 1096 as well, right? And you know the 1099s are due January 31st?....of course, being a relative, i doubt they whistle blow.
The question to above is yes. SO it makes no sense to pay yourself unless you have another avenue to file that income, like an S or C Corporation.