How to Issue a W-2 to Your Child: Withholding, Filing, and Corrections

To issue a W-2 to your child, put them on your payroll like any other employee: track their hours and wages through the year, withhold whatever federal, state, and local taxes apply to their situation, and file Copy A of Form W-2 with the Social Security Administration by January 31, along with a Form W-3 transmittal. If you run a sole proprietorship or a partnership in which both partners are the child’s parents, wages paid to your child under 18 are exempt from Social Security and Medicare taxes, and wages paid under 21 are exempt from federal unemployment tax.¹ Everything else about the W-2 works the way it does for any employee.

Does Your Business Structure Qualify

The payroll tax breaks that make hiring your child worthwhile depend on how the business is organized, so settle this before you do anything else.

A sole proprietorship, or a partnership in which every partner is a parent of the child, gets the full package: no 6.2% Social Security tax, no 1.45% Medicare tax on wages paid to a child under 18, and no 6.0% FUTA tax on wages paid to a child under 21.¹² The partnership exemption only applies when every partner is a parent; bring in one outside partner and the exemption is gone.³

A C-corp, an S-corp, or a partnership with a non-parent partner gets none of these exemptions. FICA and FUTA apply to your child’s wages the same way they apply to any employee, regardless of age.¹

A single-member LLC is the awkward case. It is normally treated as a sole proprietorship for income tax but as a separate entity for employment tax, and the IRS lists only sole proprietorships and qualifying partnerships as eligible for the family employment exemptions. If you operate through an LLC, confirm with a tax professional before assuming the exemptions apply.

Make the Job Real Before You Cut a Check

The wage deduction on your business return, and the tax treatment of everything that follows, depends on the employment being genuine. Your child has to do work the business actually needs: filing, cleaning, social media, packing orders, answering phones. Household chores and family responsibilities do not count.

Pay has to reflect fair market value for the work. If you pay $30 an hour for tasks that comparable workers do for $15, the IRS can treat the excess as a non-deductible gift rather than a wage.⁴ Look at what local businesses pay for similar work and factor in your child’s age, training, and responsibilities.

Keep a shift-by-shift log: date, hours worked, tasks completed. This contemporaneous record is your defense if the IRS asks whether the job was real. Without it, the agency can disallow the wage deduction and assess penalties.

One boundary worth noting: even with the parental exemption from most Fair Labor Standards Act age limits, no child under 18 may work in occupations the Department of Labor has classified as hazardous, including manufacturing, mining, roofing, driving on public roads, and operating most power-driven machinery.⁵ State labor rules may add further limits on hours and permits.

Onboarding Paperwork Before the First Paycheck

Your business needs a federal Employer Identification Number so payroll is tied to the business rather than your personal tax identity. Your child needs a Social Security Number so wages report correctly.

Complete a Form I-9 to verify work eligibility, and keep it for either three years after the hire date or one year after employment ends, whichever is later.⁶ Have your child fill out Form W-4 so you know how much federal income tax to withhold. If your child expects to earn less than the standard deduction — $16,100 for a single filer in 2026 — they can claim exempt on the W-4 and you will withhold no federal income tax.⁷

Report the new hire, including your own child, to your state’s new-hire directory. This is typically due within 20 days of the start date.

What to Withhold

Social Security and Medicare

If your child is under 18 and the business is a qualifying sole proprietorship or parent-only partnership, FICA does not apply at all. Neither you nor your child owes the employee or employer share.⁸ Once your child turns 18, standard rates kick in: 6.2% Social Security and 1.45% Medicare withheld from wages, plus the matching employer share.²

Federal Unemployment Tax

FUTA is exempt on wages paid to your child under 21 at a qualifying business.⁹ Otherwise, it applies to the first $7,000 of wages per year at 6.0%.¹⁰

Federal Income Tax

Income tax withholding follows the W-4 like any other employee. A child earning under the $16,100 standard deduction generally owes no federal income tax, and if they claimed exempt, you withhold nothing.⁷ Put a qualifying business, a child under 18, wages under the standard deduction, and an exempt W-4 together and the result is zero payroll tax and zero income tax, with the business still deducting the full wage as a business expense.

Filling Out the W-2

Copy A — the copy that goes to the Social Security Administration — must be printed on the special red-ink scannable paper. You cannot print it from a PDF on plain paper. Order official forms from the IRS or buy them from an authorized office supply vendor.¹¹ If you file electronically through the SSA’s Business Services Online portal, the scannable-paper rule doesn’t apply.

The boxes that matter for a child on payroll:

Box 1 (Wages, Tips, Other Compensation): total taxable wages paid during the year.
Box 2 (Federal Income Tax Withheld): the total withheld under the W-4. Zero if the child claimed exempt.
Boxes 3 and 5 (Social Security and Medicare Wages): zero or blank when the FICA exemption applies. Otherwise, the wages subject to each tax.
Boxes 4 and 6 (Social Security and Medicare Tax Withheld): zero when the exemption applies; otherwise the 6.2% and 1.45% amounts.²
Box 12: coded amounts for retirement or benefit plans. A Section 128 employer contribution to a Trump Account uses Code TA; 401(k) and SIMPLE contributions use Codes D, S, or AA.¹²
Boxes 15–17: state abbreviation, state employer ID, state wages, and state income tax withheld. If you need to report more than two states, use a second W-2.¹²

The totals on the W-2 must reconcile with what you reported on your Form 941 filings during the year, or on Form 944 if you file annually. Form 944 is available to businesses whose total annual employment tax liability is $1,000 or less.¹³

Filing and Distributing by January 31

Both the copy you give your child and Copy A filed with the SSA are due January 31 of the year after the tax year. If January 31 lands on a weekend or federal holiday, the deadline shifts to the next business day.¹⁴

File Copy A together with Form W-3, which transmits and summarizes all of your W-2s. If you file 10 or more information returns in a calendar year, you must file electronically through the SSA’s Business Services Online portal.¹⁵ Smaller filers can mail paper copies.

Give your child Copy B for their federal return and Copy C for their records. If your child earned under the $16,100 standard deduction and had no tax withheld, they generally do not need to file a return. If any income tax was withheld, filing is the only way to get it back.

Penalties for Late or Wrong Filings

Penalties for the 2026 tax year, per form:¹⁶

Up to 30 days late: $60
31 days late through August 1: $130
After August 1 or never filed: $340
Intentional disregard: $680, with no maximum cap

The penalties apply separately for failing to file with the SSA and for failing to furnish the employee copy, so one late W-2 can trigger two assessments.

Fixing Mistakes With Form W-2c

If a wage figure, Social Security number, or withholding amount was wrong, file Form W-2c with a Form W-3c transmittal as soon as you catch it, and give your child a corrected copy.¹⁷ Electronic filing is required if you expect to file 10 or more W-2c forms in a calendar year. Corrections that only affect state or local data (Boxes 15–20) go to the state or local agency rather than the SSA.¹²

Recordkeeping

Keep all employment tax records for at least four years after filing the fourth-quarter return for the year in question.¹⁸ That includes payroll journals, copies of filed W-2s, W-4 forms, and Form 941 or 944 returns. Store your child’s time logs alongside these records, and hold on to any employee copies that came back undeliverable. Good records both support the wage deduction and prove the employment was genuine.

What the W-2 Wages Unlock for Your Child

Wages reported on a W-2 create earned income, which is the trigger for a Roth IRA. There is no minimum age; your child just needs earned income. For 2026, the contribution limit is $7,500 or total taxable compensation for the year, whichever is less.¹⁹ A parent or grandparent can put in the money as long as the deposit does not exceed what the child actually earned.

Starting July 4, 2026, a Trump Account is also available for children under 18. Other individuals may contribute up to $5,000 a year in total, and an employer may contribute up to $2,500 a year toward that limit through a Section 128 program without creating taxable income for the employee.²⁰ Employer contributions are reported in Box 12 with Code TA.¹² For eligible children born between January 1, 2025 and December 31, 2028, the federal government makes a one-time $1,000 contribution when a parent or guardian establishes the account.

1
Internal Revenue Service. Family Employees
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