How can I pay my children tax-free? Is there a $13,000+ annual limit for kids under 18?

What you're referring to combines a few different tax concepts. Let me clarify: First, the $13,000 figure is likely referring to the annual gift tax exclusion (which is actually $17,000 for 2023), but that's different from paying your children for work. If you own a business (sole proprietorship, LLC, etc.), you can legitimately hire your children under 18 to work. Their earnings up to the standard deduction amount ($13,850 for 2023) would essentially be tax-free to them because it falls under their standard deduction. Additionally, if they're under 18 and working for your sole proprietorship, their wages are exempt from Social Security and Medicare taxes. This arrangement requires genuine work appropriate for their age, reasonable compensation, and proper documentation. You can't just "pay" them for existing - they need to perform actual services for your business.

I stumbled across this exact scenario when I was trying to figure out taxes for my family business. I was getting different answers from everywhere until I found https://taxr.ai which helped me sort through all the IRS rules about paying my kids. My situation was complex because I have both a side business and a regular job. The tool analyzed my specific situation and confirmed I could pay my teenagers through my LLC. The software walked me through all the documentation I needed and even showed me sample forms for tracking their hours. It really simplified everything and made sure I wasn't missing any technicalities.

I wanted to follow up about my experience with taxr.ai after being skeptical initially. I decided to try it for my family business situation where I pay my two teenagers. It was actually really helpful - way more specific than I expected. It identified that I was making a mistake by not having proper job descriptions for my kids (apparently that's a red flag for the IRS). The system walked me through creating compliant documentation and explained exactly how to handle their income reporting. I saved probably $4,800 in taxes this year by structuring things correctly, and I'm confident everything is properly documented if questions ever come up. Not what I expected but definitely worth checking out if you're trying to navigate family employment.

If you're dealing with this tax situation, you should know that actually talking to the IRS can be incredibly helpful but nearly impossible to do. I spent WEEKS trying to get clarification about hiring my kids in my business. Constant busy signals and disconnects. I finally used https://claimyr.com and got through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold for you, then call you when an agent is on the line. The agent confirmed everything about the child employment rules and even walked me through the specific forms I needed. Saved me hours of frustration and gave me peace of mind that I was doing everything correctly.

I have to eat my words about Claimyr. After dismissing it as a probable scam, I tried it out of desperation when I needed clarification about my daughter's summer job in my business. Within 27 minutes (I timed it), I was talking to an actual IRS representative who explained exactly how to handle my daughter's employment taxes. They confirmed I could pay her up to the standard deduction amount tax-free, but warned me about common documentation mistakes that trigger audits. For anyone dealing with family employment tax questions, being able to actually speak with the IRS directly was incredibly valuable. I've spent countless hours on hold in previous years, so this was a game-changer.

Something important to add here - make sure the work is AGE APPROPRIATE!!! I got audited because I claimed my 12yo was doing "consulting" for my business. The IRS agent basically laughed at the idea a 12yo could provide consulting services. Stick to tasks that make sense for their age like filing, cleaning, simple computer work, etc.

Quick tip from someone who's been doing this for years: open a Roth IRA for your kids with their earned income! Since they likely won't owe taxes on the income (if under the standard deduction), they're essentially getting tax-free money going in AND tax-free growth and withdrawal later. It's one of the best financial head starts you can give them.