Do I give my children 1099's? Have a small business (no employees) except my children. Each made less than 2k. but I want to deduct the expense if possible.

[leilani060]

I have a very small business with no employees except I occasionally pay my children to help. They are 16, 17 and 22. They each have no other income except for around 2k they each made working for  me on a small contract I had last year. 

Can I deduct this as a business expense? Do I give them 1099's? 

[Coleen3 · Accepted solution]

They should be issued Forms W-2 and avoid SE taxes on the two younger ones.

Payments for the services of a child under age 18 who works for his or her parent in a trade or business aren't 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. If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they’re not subject to social security and Medicare taxes until the child reaches age 21. However, see Covered services of a child or spouse, later. Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, aren't subject to FUTA tax. Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child isn't regularly employed to do such work

 <https://taxmap.irs.gov/taxmap/pubs/p15-002.htm>