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Putting a young child on the payroll

by on
in Employee Benefits Program,Hiring,Human Resources

Q In the past, you’ve discussed hiring a child to work for the business. If a young child has monthly responsibilities, does that give payroll credibility? T.M., via e-mail

A Yes. You may deduct reasonable wages paid to a minor child for services actually rendered as a bona fide employee in conducting a trade or business. (IRS Revenue Ruling 72-23) It gives more credence to a legitimate employer-employee relationship if the employer states responsibilities in writing. A previous Tax Court case approved a deduction for a child as young as seven years old. (Eller, 77 TC 934)

Tip: A businessperson cannot deduct a personal allowance paid to a child just for doing certain chores. To qualify for deductions, the child must actually render services to the business.

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