Hiring Your Child Through an S Corporation

Family-employment exceptions depend on the actual employer and relationship. Do not apply rules for a parent's sole proprietorship automatically to an incorporated business.

A business-owner scenario

An S-corp owner hires a teenager to organize inventory and create product photos. The owner has read that children's wages are exempt from certain payroll taxes. The company needs to verify corporate payroll treatment, real duties and reasonable pay before processing wages.

Illustrative scenario, not a client result.

Work through the transaction

Confirm the employing entity and applicable family-employment rules.
Document actual age-appropriate work and compensation.
Coordinate payroll and employment-law requirements.

The mistake that changes the result

The family relationship does not turn a corporate wage payment into a sole-proprietor payment.

Records that resolve the question

Job description.
Hours and work product.
Pay support.
Corporate payroll setup.

The decision to document

Ask payroll to explain the applicable taxes and reporting for the actual employer. Counsel or a qualified employment specialist should address work restrictions where needed; the tax deduction does not replace those obligations.

Which fact changes the answer?

Real inventory and photography work should leave ordinary evidence of completion. Maintain it alongside time and pay records. An age-based payroll exception discussed online may refer to a different employer structure, so confirm the exact rule before suppressing withholding or employer taxes.

Explore employees and owner benefits advisory · Discuss your situation with AE Tax Advisors

Sources and scope

General educational information prepared with AI assistance. No individual professional review is represented. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.

Does hiring my child eliminate payroll taxes in my S corp?