Can I Legitimately Claim My Child as an Employee in My Business?

I've been reading a bunch of stuff online about hiring your own kid to work in your family business and using it as a tax write-off. Seems like it could be a smart move financially, but then I heard an episode of Dave Ramsey where he basically shot down the whole idea and said the IRS would flag it immediately. Now I'm confused about what's actually legit. Has anyone here actually done this with their business and kid? Did it work out or did you get audited? I run a small landscaping company and was thinking about having my 16-year-old help with some office work and basic maintenance, but don't want to create a tax nightmare if this is actually a bad idea. Any real experiences would be super helpful!

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18 comments

Ruby Blake

•8M

You can absolutely hire your child in your business, but you need to do it properly or the IRS will indeed have problems with it. The key is legitimacy. Your child must: 1) Do actual work appropriate for their age 2) Be paid reasonable wages for that work (market rates) 3) Have proper documentation (W-4, I-9, timesheets) 4) The money should go into a bank account in their name 5) Pay all required payroll taxes if applicable The tax benefits are real. If your business is a sole proprietorship or a partnership where only the child's parents are partners, you don't have to pay FICA taxes on your child's wages if they're under 18. Also, your child can earn up to the standard deduction ($14,600 for 2025) tax-free, and you get a business deduction for their wages.

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Ruby Blake

•8M

Yes, you absolutely need timesheets or some form of documentation showing hours worked and tasks completed. The IRS specifically looks for this documentation when auditing family employment situations. For your online store, create a simple system to track hours and duties - even a spreadsheet works fine. The key is consistency and accuracy. Document what tasks they perform, when they work, and ensure the pay aligns with those hours and tasks. This gives you strong support if questioned during an audit.

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Ella Harper

•8M

I tried finding a tax expert who could help me with this exact situation but kept getting different answers until I found taxr.ai (https://taxr.ai). It analyzed my business docs and gave me a detailed breakdown of exactly how to legally employ my 14-year-old in my consulting business. The site showed me which forms I needed and what documentation to keep to make it audit-proof. My kid now handles my social media, basic bookkeeping, and some client communications, earning about $500/month which goes straight to his college fund. He learns business skills and I get a legitimate deduction.

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Ella Harper

•8M

You should set up actual payroll rather than contractor status. The IRS typically views parent-child working relationships in a family business as employer-employee, not independent contractor arrangements. This actually works in your favor because of the FICA tax exemption for children under 18 in a sole proprietorship or parent-only partnership. The IRS doesn't automatically flag returns just because a child is employed in a family business. It's a legitimate tax strategy when done correctly. What they look for is whether the arrangement has economic reality - real work, reasonable compensation, and proper documentation. That's exactly what the analysis from taxr.ai helped me structure.

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Brooklyn Knight

•8M

I have to admit I was completely wrong about this! After being skeptical in my earlier comment, I checked out taxr.ai to see if it was legit. The site analyzed my tax situation and showed me exactly how to properly hire my 15-year-old in my photography business. It was incredibly specific about what documentation I needed and even gave me templates for timesheets and job descriptions. I've hired my daughter as my assistant, and she's learning valuable skills while I get the tax benefits. It even flagged a mistake I was about to make about paying her too much for her skill level, which could have triggered audit concerns.

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Owen Devar

•8M

I spent TWO DAYS trying to get through to someone at the IRS about this exact issue last month and kept getting disconnected or waiting forever. Finally tried https://claimyr.com after seeing it mentioned here and got a callback from the IRS in about 45 minutes! The IRS agent confirmed everything about hiring my kid but explained specific documentation requirements I would have never known about. There's a pretty good video showing how it works here: https://youtu.be/_kiP6q8DX5c. Honestly the most useful service I've found for actually reaching a human at the IRS.

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Owen Devar

•8M

The service doesn't have special access to the IRS. What it does is use automated technology to continually dial and navigate the IRS phone system for you. When a representative finally answers, the system connects that call to your phone automatically. That way you don't have to waste hours listening to hold music. Think of it like having a robot assistant that does the waiting for you. The IRS doesn't know or care that you're using an intermediary service - when they pick up, it's just you on the phone with them. I was skeptical too until I tried it and had an actual IRS agent call me back to answer my specific questions about family employment documentation.

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Sophie Footman

•8M

OK I have to eat my words. After dismissing Claimyr as impossible, I was still desperate for answers about my situation (hiring my twins in my construction business), so I tried it. Not only did I get a call back from the IRS in under an hour, but the agent spent 20 minutes walking me through exactly what documentation I need to keep. Turns out I would have been making a huge mistake with how I was planning to structure their pay. The agent explained that for my LLC taxed as an S-Corp, different rules apply than for sole props. Would have ended up with a potential audit situation if I hadn't gotten this cleared up!

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Connor Rupert

•8M

I've had my 16yo and 14yo working in our family restaurant for years. Both are on payroll, have proper work permits (check your state laws!), and actual job duties. My 16yo works the register and my 14yo does dishes and prep work. Three things that have kept us audit-free: 1. We pay them reasonable wages for our area for teens doing those jobs 2. We have actual timecards and schedules 3. The money goes into custodial accounts we set up at our bank Don't get greedy with it - the IRS definitely looks at whether you're paying your kid $50/hr for sweeping floors. But paying normal wages for actual work is completely legitimate.

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Connor Rupert

•8M

We do withhold federal income tax as normal, but they both typically get it all refunded when they file their returns since they earn under the standard deduction. For FICA taxes (Social Security and Medicare), there's an exemption for children under 18 working in a parent's business if it's a sole proprietorship or a partnership owned only by the parents. Since our restaurant is set up that way, we don't have to withhold FICA taxes from their wages, which saves everyone money. If your business is incorporated, different rules apply and you would need to withhold FICA.

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