@Hal_Al wrote:
You should issue them W-2, not 1099-NEC. That way, none of it is subject to Self employment or FICA tax.
Well, I would still say that is dependent on the worker-employer relationship.
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...
It is true that if the children are classified as employees and paid on a W-2, the parent-employer does not have to withhold and pay FICA, FUTA or Medicare tax, which means the child's tax will be lower than if they are paid on a 1099. It's probably too late to change this for 2020, since canceling the 1099s and issuing late W-2s could raise red flags. The children could be paid as W-2 employees for 2021.
However, you would also need to follow all state laws that apply to employees, unless there are exceptions for one's own children. Such as minimum wage laws, laws about insurance and other benefits, hours allowed to work, and so on. For example, in NY, an employer must provide a pay statement that contains 13 or 15 specific pieces of information, and the fine for failing to provide a conforming pay statement is $100 per employee per paycheck. You might be required to pay a state minimum wage, or follow number of hours worked limits, or get permission from the child's school district (a work permit). A family employer might or might not be exempt from these laws with respect to their own children.
Make sure you know the rules and limits before you hire your children as regular employees.
