I have not watched the video, because I’m not going to give the man clicks. The notes to the video make him sound like a common huckster. The comments are frankly alarming, several people who are clearly going to just throw money at their children without having them perform legitimate work, and one person who wants to figure out how to give earned income to a baby so that he can open a Roth IRA for the baby!
The most important thing about employing your child is that the child must perform legitimate work for your business, and must be paid a fair market wage for that work. You must also follow all applicable state and federal labor laws including child labor laws. (Some of those laws may have exceptions for hiring your own children in certain jobs, but you must make yourself aware of those laws and what those exceptions might be in your state.)
The theory in the video seems to be that issuing your child a W-2 will bring attention to you at the IRS and may result in an audit. And so the person making the video is suggesting filing no paperwork so as to keep under the radar. But if you are employing your child to perform legitimate work at a fair market wage, you would have nothing to fear from an audit and filing the correct paperwork will only strengthen your case.
You must issue a W-2 if you are paying enough that you trigger a requirement to withhold state or federal income tax, even if you are not required to withhold employment taxes. If you pay less than that, then failing to file the W-2 is not technically illegal.
