My daughter (16 years old)works for me. (builds video's, handles social media, etc.). Does it make sense to have her as an employee or contractor?

[dneran]

She is taking on any projects herself with  little direction from me. With her age and being a family member would I still need to pay payroll taxes by having her as an employee? If contractor is better does she need to file a 1099 from me?

[Bsch4477]

From the IRS:

Child employed by parents

Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Refer to the "Covered services of a child" section below. Payments for the services of a child under age 21 who works for his or her parent in a trade or business are not subject to Federal Unemployment Tax Act (FUTA) tax. Payment for the services of a child are subject to income tax withholding, regardless of age.

Covered services of a child

The wages for the services of a child are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for:

• A corporation, even if it is controlled by the child's parent,
• A partnership, even if the child's parent is a partner, unless each partner is a parent of the child, or
• An estate, even if it is the estate of a deceased parent.

[dneran]

Thank you for the detailed response....very helpful. One question, since she wouldn't be subject to all the various taxes due to age how do I "label" my 16 year olds work through turbo tax? employee or contractor or is there another option?

[DaveF1006]

it depends. If you paid your daughter $400 or more, I would suggest issuing a 1099 MISC so that she can report this. In fact, this is an IRS requirement that must be followed if self-employment income is more than $400.There will be no tax consequence since she is underaged and you can claim this as a contract labor expense. 

If you withheld taxes and sent to the IRS, then i would suggest filing a W2 so if your daughter files her taxes, she can receive that money back. Hopefully this is a guideline on which form to file.