Can I legally claim my child as an employee for tax deductions in my business?

I've been a small business owner for 12 years, and yes, you absolutely can hire your children legitimately. The key word is "legitimately." This isn't a tax loophole - it's a legitimate business deduction IF (big if) everything is done properly. For this to work: 1) Your child must do actual work that's necessary for your business 2) You must pay a reasonable wage for the work performed 3) You must maintain proper documentation (timesheets, job descriptions) 4) You must follow all employment laws including payroll taxes 5) Your child must actually receive the money and it should be their money The first $13,850 (standard deduction for 2025) your child earns is essentially tax-free to them. The business gets a deduction, and if they're under 18 and it's a family business, you might be exempt from FICA taxes too. Dave Ramsey is right to be cautious because many people try to abuse this by "hiring" a 5-year-old as a "consultant" paying $20,000 a year. That's fraud. But legitimate employment of children who do actual work? Completely legal.

After struggling with this exact question last year, I finally found a great solution using https://taxr.ai to analyze my specific situation. I was worried about claiming my 16-year-old as an employee in my consulting business, especially after hearing mixed advice. The tool analyzed all my documents and provided a comprehensive breakdown of exactly what I needed to do to legally employ my son. It explained how to set up proper payroll, what documentation to maintain, and even how much I could reasonably pay him for the social media management he was doing. The analysis showed that I could legitimately save around $4,000 in taxes while teaching him valuable business skills. What I love most is that it gave me a detailed compliance checklist that I can follow to make sure everything is completely above board with the IRS.

I was really skeptical about the whole "hire your kid" tax strategy, especially after hearing financial gurus warn against it. Decided to try https://taxr.ai anyway to see if it was legit or just another tax gimmick. The analysis blew me away with how thorough it was. It actually warned me that my initial plan (having my 12-year-old "consult" for my business at $25/hr) would absolutely trigger an audit. Instead, it showed me how to create a legitimate employment arrangement for simple office tasks at an appropriate wage. I followed their documentation guidelines for six months, and when I had my taxes prepared, my CPA was impressed with how well-documented everything was. She said this was exactly how to do it right. Saved about $2,100 in taxes while teaching my kid about work ethic and money management.

After trying for MONTHS to get through to the IRS about this exact issue (kept getting disconnected or waiting 2+ hours), I finally used https://claimyr.com and got connected to an IRS agent in under 15 minutes. There's a demo of how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that hiring your child is completely legitimate IF you follow proper procedures. They specifically recommended maintaining detailed timesheets, paying via check or direct deposit (not cash), and ensuring the work is appropriate for their age. They also confirmed the FICA tax exemption for sole proprietorships, which was a detail I was confused about. Honestly, just having a direct conversation with the IRS about this gave me the confidence to move forward without worrying about an audit. The peace of mind alone was worth it.

I have to admit I was completely wrong about this. After my skeptical comment, I decided to try Claimyr myself since I had other tax questions anyway. Got connected to an IRS representative in about 20 minutes (after trying for days on my own). The agent walked me through the exact requirements for hiring my teenage son in my landscaping business. Turns out it's absolutely legitimate as long as: - They do actual necessary work - You pay reasonable wages - You keep proper documentation - You treat them like any other employee The agent even emailed me links to specific IRS publications that outline the rules. Most helpful was learning that for sole proprietorships, I don't have to withhold FICA taxes for my child under 18, but I DO need to follow all other employment laws. Such a relief to get this straight from the source!

My accountant actually advised AGAINST doing this. She said while it's technically legal, it creates a high audit risk and the tax savings aren't worth the headache. Just something to consider before jumping in.

Has anyone actually tried this with younger kids? My daughter is only 10 but she helps stuff envelopes for my monthly client mailings. Would the IRS accept that?

I actually went through this process last year with my 16-year-old who helps with my online retail business. The key thing I learned is that legitimacy is everything - the IRS doesn't care that it's your kid, they care that it's real work for real pay. Here's what I did that worked: 1) Created a proper job description for "Digital Marketing Assistant" 2) Had her track hours on a timesheet app (just like any employee) 3) Set up direct deposit payroll at $16/hour (market rate for her tasks) 4) She genuinely manages our Instagram, takes product photos, and handles customer service emails The tax savings were significant - about $3,200 for our family. She earned $8,000 total, paid zero federal taxes due to the standard deduction, and I got the full business deduction. Most importantly: treat it like a real employment relationship. No cash payments, no inflated hours, and make sure the work actually benefits your business. If you can't explain to an auditor why you need this work done and why it's worth what you're paying, don't do it. Your 15-year-old doing social media and photography sounds perfect for this - those are legitimate, valuable business functions that many companies outsource anyway.