What Counts as “Real Work” When Hiring Your Kids? Understanding what the IRS expects — and what makes sense for real families

Understanding what the IRS expects — and what makes sense for real families

One of the biggest questions I get after sharing how we paid our kids through our family business is:
Understanding what the IRS expects — and what makes sense for real families
“What exactly did they do?”

Not in a sarcastic way. Genuinely. Because people want to know: What work can a toddler do that qualifies as real compensation?
If we’re paying them, what are they doing? Is it just a loophole—or is there something real here?

It’s a great question. And the answer is grounded in both IRS expectations and common sense.

Let’s break it down step by step—what the IRS allows, what families are actually doing, and how to keep things ethical and audit-safe.

First: What the IRS Actually Allows

The IRS allows you to hire your children in your own business—as long as certain conditions are met.

Here’s what’s required:

1. The child performs bona fide work for the business
2. The work is age-appropriate and necessary
3. The compensation is reasonable for the services performed
4. The payments are documented and reported properly
5. The business is parent-owned and unincorporated (sole prop or partnership/LLC taxed as such)

If those boxes are checked, you're not just allowed—you’re encouraged—to employ your children in your business.

And yet, most people still don’t. Why?

Because they assume that unless the child is stuffing envelopes or coding software, the work isn’t "real."

That’s not true. But it does have to be defensible.

So What Counts as “Real Work”?

Let’s look at this in a way that’s practical and rooted in family reality. Below is a breakdown by age group, with examples pulled from real use cases.

Ages 0–2: Presence and Likeness

Infants and toddlers are unlikely to type reports or do sales calls—but they can still contribute to your business in ways the IRS recognizes.

Legitimate roles at this age may include:

• Likeness licensing: If your business uses your baby’s image in a product (e.g. a book, brand mascot, character), you can compensate them
• Product modeling: For family YouTube channels, posters, or even digital avatars
• Brand identity: When your child is a recognizable part of your business story or brand image
• AI likeness training: If you're building characters or generating assets based on your child’s photos, features, or name

Think of it like a baby model in an ad campaign. The work isn’t intellectual—it’s brand-based and visual. But it’s real.

Documentation tips:

• Keep photo or video logs of their use
• Sign a likeness release (yes, even for your own child)
• Document the project where they appear

Ages 3–5: Inspiration, Personality, and Early Performance

Preschoolers are remarkably capable of participating, especially in creative or performative ways.

Common “work” roles at this age include:

• Voice snippets for stories or animations
• Photo appearances for books, promo assets, or illustrations
• Acting as character inspiration — if your kid is “Liam” in a storybook, that’s IP use
• Participating in brand brainstorming (what colors, what animals, etc.)
• Modeling for AI character art — especially if the likeness is stylized or animated

This work is often framed as creative participation rather than technical labor.

Examples:

• You create a book series starring characters modeled after your kids
• Your toddler’s voice or reactions are included in a narrated video
• You use an AI tool to create a cartoon series with characters based on your family

In every case, the child is part of the brand’s value, and you can justify compensation accordingly.

Documentation tips:

• Audio or image logs of where and how your child was used
• Project notes explaining their role or presence
• Monthly summaries of participation

Ages 6–10: Assistant Roles and Repeatable Tasks

School-age children can begin performing structured, trackable tasks that contribute to your operation—especially if they’re familiar with the business.

Examples of acceptable work:

• Reading books or lines for narration
• Assisting with behind-the-scenes content
• Packing light orders, placing stickers, labeling products
• Proofing or choosing designs, colors, fonts
• Helping with social media reels or script ideas

The key is to move toward repeatable contribution—tasks they can perform periodically that directly support the business.

This age group is great for light assistant roles, and often develops pride in their work if structured positively.

Ages 11+: Entry-Level Business Help

At this point, kids can function as junior team members with real deliverables.

Work examples:

• Managing blog post formatting
• Scheduling content using tools like Buffer or Canva
• Assisting with bookkeeping entries
• Helping design thumbnails or print layouts
• Writing thank-you notes to customers or helping with email replies (with supervision)

These tasks are easily documentable, valuable, and increasingly self-directed.

What Doesn’t Count as Real Work?

To keep things clear, here’s what the IRS does not consider valid compensation:

• Chores around the house (unless tied directly to a home-based business)
• Fake work logs or time entries with no supporting output
• Excessive pay without industry comparison or scope justification
• Compensation in name only (e.g. paying $10,000 just to deposit into an IRA)

The Golden Rule: Link to the Outcome

For any age, always ask:
“Does this child’s work, likeness, or contribution directly connect to a business outcome?”

If yes — and it’s trackable and documented — it’s likely safe to pay them.

How We Use This In Our Business

In our case, our young kids:

• Serve as characters in our content
• Contribute their voices to narrated storylines
• Are the face and name of branded books and products
• Appear on print posters and promotional graphics
• Occasionally participate in family “planning meetings” for story ideas

We don’t stretch the definition—we just document what they actually do.

We also use likeness releases, assign flat monthly pay rates, and keep project logs with screenshots, timestamps, and payroll records.

If the IRS ever asked, we’d have a clean file showing:

• What each child contributed
• What product that work appeared in
• How much they were paid
• When and how payment was issued

Final Thought: It’s Not About “Working” Your Kids

We’re not trying to raise tiny executives. We’re trying to create structures where our family can:

• Build together
• Earn together
• Learn together
• And benefit together

If your child is helping your business grow—by being in the content, inspiring the product, or even just showing up in the brand—don’t be afraid to honor that legally and financially.

Just do it with respect, clarity, and documentation.

More in a future post: How we assign pay rates, use market comparisons, and structure work logs for audit-ready compliance.

Disclaimer: The information provided in this post is for general educational and informational purposes only. It is not intended as, and should not be construed as, financial, legal, tax, investment, or other professional advice. You should consult with your own qualified advisors before making any financial decisions. We disclaim all liability for any actions taken based on the content provided.