By: Kelcey Hoffmann
To be published by Dakota Farmer at farmprogress.com
Do you have children under the age of 18 who help you on the farm throughout the year? And do you currently pay them with cash from your personal account instead of through your farm or business account?
If you answered yes to both of these questions, it may be time to officially make your child an employee of your farming operation. Not only is this a more compliant and organized approach, but it can also offer meaningful tax benefits for your farm—and for your family.
Tax Advantages of Employing Your Child:
When a child under age 18 works for a parent’s sole proprietorship or a partnership where both partners are the child’s parents, their wages are not subject to Social Security (FICA) or Medicare taxes. Additionally:
- A child can earn up to $12,200 in wages before being required to file a federal income tax return (assuming they have little to no unearned income).
- If their income remains under this threshold, they won’t owe federal income tax, and your farm can deduct those wages on Schedule F, helping reduce both your taxable income and self-employment tax.
- However, if the child earns more than $350 in investment income (interest, dividends, etc.) and total income exceeds $1,050, they will likely need to file a return.
Guidelines for Hiring Your Child:
To take full advantage of this opportunity and ensure compliance with IRS guidelines, keep these best practices in mind:
- Wages must be reasonable for the work performed. This means paying your child a fair market wage for age-appropriate tasks.
- Document everything: Maintain a timecard, spreadsheet, or calendar noting the date, hours worked, and specific tasks completed—just like you would for any other employee.
- Pay by check from the farm/business account and adhere to a regular payroll schedule (weekly, bi-weekly, or monthly).
- Have your child complete the proper forms:
- Form W-4 (Employee’s Withholding Certificate)
- Form I-9 (Employment Eligibility Verification)
- Any additional employment documentation required by your state or business.
- At the end of the year, issue a W-2 to your child reflecting total wages earned.
- Consider creating a simple employment contract or task agreement to clearly define expectations and establish legitimacy.
How Young Is Too Young?
You might be wondering: How young is too young to start paying your child? While there’s no strict minimum age, the IRS has accepted children as young as 7 or 8 years old for wage purposes—as long as the work is age-appropriate and meaningful.
For example, tasks like feeding small animals, picking rocks, or cleaning tools might be acceptable. But more complex duties like operating large machinery or planting corn may not be seen as reasonable for that age group. The key is being able to justify the work and wages in the event of an audit.
A Win-Win Situation!
Paying your child through the farm isn’t just a tax strategy—it’s also a great way to teach them responsibility, work ethic, and financial literacy. Meanwhile, you’re able to reduce taxable income and self-employment tax by shifting money you may have already been giving them into a deductible business expense.
In short, hiring your child properly can benefit both your bottom line and your family’s future.
Hoffmann is a North Dakota Farm Management Education Program instructor at North Dakota State College of Science in Fargo. Visit ndfarmmanagement.com for more information.