No. You cannot deduct the payments to your children on your tax return because you do not have a business activity you are paying them to work in. The W-2 would have your social security number (SSN) for the payer identification number since you do not have a business and there are no required payments to be made to the IRS. Simply complete the W-2(s) and the W-3 which is a transmittal.
The child is not required to file a tax return for 2021 if you issue a W-2 because their income would be below the filing requirement.
Filing requirement for dependents 2021: You must file a return if any of the following apply.
- Your unearned income was more than $1,100.
- Your earned income was more than $12,550.
- Your gross income was more than the larger of—
- $1,100, or
- Your earned income (up to $12,200) plus $350.
As indicated by Tax Expert @GeorgeM777 the standard deduction for dependents:
- Dependents – If you can be claimed as a dependent by another taxpayer, your standard deduction for 2021 is limited to the greater of:
- (1) $1,100, or
- (2) your earned income plus $350 (but the total can't be more than the basic standard deduction for your filing status-$12,550 for 2021).
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