Is 1099ing my own teenagers as easy as it sounds for tax purposes?

But I thought there was a big tax advantage to hiring your kids in a family business? Something about them being exempt from certain taxes if they're under 18? Does that only apply if they're W-2 employees and not 1099 contractors?

You're absolutely right that there are potential tax advantages, but they primarily apply when your children are properly classified as employees (W-2), not contractors (1099). If your children are under 18 and working in a parent-owned business that's a sole proprietorship or a partnership where only the parents are partners, their wages are exempt from Social Security and Medicare taxes. If they're under 21, their wages are exempt from Federal Unemployment Tax. These exemptions don't apply to 1099 contractors - they'd still owe self-employment taxes on their earnings.

Does it actually explain the difference between when you should use a 1099 vs W-2 for family members? I'm getting conflicting advice from different places and don't want to mess this up.

I'm skeptical about these online tax services. How detailed is their advice? Do they just give generic info or do they actually look at your specific family business structure?

Yes, they clearly explain when to use 1099 vs W-2 for family members based on factors like business structure, age of your children, type of work performed, and level of control. They have specific guidance for sole proprietorships, partnerships, corporations, and LLCs. Their advice isn't generic at all - they analyze your actual documentation and business structure. In my case, they looked at my sole proprietorship details and my son's specific duties to determine he should be classified as a W-2 employee, which actually saved us more in taxes than the 1099 route I was planning to take.

Wait how does this actually work? The IRS phone system is notoriously impossible to navigate. Does this service somehow jump the queue or something?

That sounds too good to be true. I've literally spent entire days trying to reach the IRS. There's no way this actually gets you through that quickly.

It uses a system that monitors the IRS phone lines and calls repeatedly until it gets through. Once it connects, it immediately calls you and connects you with the IRS agent. It's completely legitimate - nothing shady or queue-jumping happening. They basically do what you'd do if you had unlimited time and phone lines - they keep calling until they get through, then transfer the successful call to you. It saved me from having to sit by my phone for hours listening to hold music.

What if my kids really are working independently though? They did website design and marketing materials for my business, set their own hours, used their own computers, and had other clients too. Wouldn't they legitimately be contractors in that case?

You're absolutely right that in some cases family members can legitimately be contractors. The key factors are exactly what you described - they set their own hours, used their own equipment, had other clients, and performed work that's not part of your core business operations. In that specific situation, 1099s could be appropriate. Make sure you have good documentation of their independent status - contracts specifying the work to be performed rather than hours to be worked, invoices from them to your business, proof they have other clients, etc. The more evidence you have that they're truly operating independently, the better position you'll be in if questioned by the IRS.

I used QuickBooks for this last year. It was pretty straightforward - entered their info, paid for the forms, and QB printed and mailed them. Cost about $25 total for filing with my kid and the IRS. But honestly, after reading this thread, I'm wondering if I should have done W-2s instead...

Thanks for the QuickBooks tip! That seems reasonable. And yeah, I'm now reconsidering whether 1099s are even the right approach based on all these comments. Might need to look into the W-2 employee route instead.

Does this work if my business is an LLC taxed as a sole proprietorship? Or only for actual sole props?

Yes, it works for an LLC taxed as a sole proprietorship too. The IRS treats them the same way for this purpose. The key is that you're reporting business income and expenses on Schedule C of your personal tax return. It doesn't work for LLCs taxed as corporations or for businesses that are actual corporations (S-corp or C-corp). In those cases, your children's wages would be subject to all the normal employment taxes regardless of their age.

This is excellent advice about documentation! I learned this the hard way when I got questions from the IRS about paying my nephew who worked in my landscaping business. They wanted to see everything - what he did, when he worked, how I supervised him, what equipment he used. One thing that really helped my case was that I had him write brief daily summaries of his tasks and I kept copies of any text messages where I gave him work instructions. It clearly showed the employer-employee relationship rather than an independent contractor arrangement. For anyone reading this - if your kids are doing work that's integral to your business operations (like helping with your core services), working during hours you set, using your tools/equipment, and following your specific instructions on how to do the work, they're almost certainly employees regardless of age or family relationship. The documentation Mateo mentioned will help support whatever classification you choose.