The owner of a business may employ his/her children in the business.

Each child can earn an amount up to the standard deduction for the current year and they will be free from income tax, while the business can deduct the expense of the amount paid, provided it is reasonable compensation for the services actually rendered by the child.  It apparently does not matter how young a child is when the parent employs them in their business, as long as the child can perform some useful service and actually does the service.

What can your small children do around the office that would be a service you would have to pay someone else to do?  Can they take out the trash?  Can they clean and tidy up the office?  Can they make coffee; do some data entry or any other simple task?  Well, if you had another employee, you would have to pay them for that service wouldn’t you?  So why not have 9 year old John do it and get a tax break?  You will be shifting income from your higher tax bracket into a non-taxable one (or at the very least a lower one) and you will also be training your child how to work in the real world.  Then after your child receives their paycheck, teach them the value of a budget and have them buy personal items that you would normally have to buy for them.  The majority of kids today believe that money is unlimited because they have parents as cash cows, so you will be giving your child a great advantage early in life, if you teach them the real value of money and how difficult it is to earn it.

As the parent, you will still be able to deduct your child as an exemption on your tax return, provided that you continue to provide over half the support of the child.  Also, remember, for your business to be entitled to the deduction, make sure you keep the payroll records and pay the payroll taxes for your child.