How to Document Child Employee Hours for the IRS

Under IRC §162(a) and Reg §1.162-7, wages paid to child employees in your STR business are deductible only if the work is genuine, the pay is reasonable, and you can prove both. The documentation system is straightforward: written job description, weekly time logs, task records or photos, and payment by check — the same paper trail you'd expect for any legitimate employee.

Why Documentation Is Non-Negotiable

The IRS knows that family employment is a common tax strategy, and they scrutinize it accordingly. An audit question about your child employee is essentially: "Did this child actually do real work, and was the pay appropriate for that work?" Your documentation must answer both questions with contemporaneous evidence — records created at the time of the work, not reconstructed afterward.

Hosts who get in trouble with child employment deductions almost always fail on one of these points: the work wasn't real (or wasn't documented), the pay was excessive for the tasks, or the payments were made in cash with no paper trail.

Document 1: Written Job Description

Before your child starts working, create a written job description that specifies:

• The child's name and age
• Start date of employment
• Specific tasks and responsibilities
• Expected hours per week or per turnover
• Hourly wage and pay schedule
• Performance expectations

This one-page document establishes that this is a real employment relationship, not a retroactive paper creation at year-end. Keep it in your business records alongside their W-4.

Document 2: Time Logs

A time log is your primary evidence of hours worked. It should capture:

• Date of work
• Start and end time (or total hours)
• Tasks performed that day
• Signature or initials of the child (or parent noting completion)

A simple weekly timesheet works. A Google Sheet or a physical ledger both qualify. What matters is that it's maintained regularly — not filled in retroactively for the whole year in December. Many STR hosts tie time logs to turnover dates: "Laundry turnover after Guest Smith checkout, 3 hours."

Document 3: Task Records and Photos

Task records are the most compelling evidence — they show the work product, not just the claim of hours. For STR-specific tasks:

• Laundry: Photos of completed folded linens, filled linen closet
• Cleaning/restocking: Before/after photos of completed turnover preparations
• Property inspection: Written walkthrough checklists signed by the child
• Social media content: Screenshots of photos taken, posts published, account metrics
• Guest check-in: Text/email confirmations of communication handled
• Inventory management: Updated supply lists, purchase recommendations

A folder of dated photos showing completed work sessions creates powerful supporting evidence that goes beyond mere time logs.

Document 4: Pay by Check or Direct Transfer

Cash payments to child employees are a documentation disaster. Pay every wage by:

• Check drawn from your business account, payable to your child
• Zelle, Venmo, or direct deposit with a clear business description ("Wages - [date range]")
• Never "gifts," gift cards, or cash

When your child deposits the check in their account, the paper trail becomes complete and bank-verifiable. This is also necessary for your child to fund a Roth IRA — they need documented earned income.

Document 5: Reasonable Hourly Rate

Pay must reflect what you'd pay an unrelated person for the same tasks. Research and document:

• Local minimum wage (your child must be paid at least minimum wage for documented hours)
• What local cleaning and hospitality jobs pay for similar tasks
• Job postings in your area for comparable work

For reference, $12–$18/hour for basic STR tasks (laundry, restocking, light cleaning) and $15–$25/hour for more skilled work (photography, guest communication) is generally defensible in most markets. Save the job postings or market data you used to set the rate.

What Happens If Audited

If the IRS questions your child employment deductions, they will likely ask for:

• The job description
• Time records showing hours worked
• Evidence that the work was performed (photos, task logs)
• Proof of payment (cancelled checks or bank records)
• The W-2 issued to the child
• The child's tax return (confirming wages were reported)

If you have all of this, the audit risk is low. If you have none of it — just a number on a W-2 and a Schedule C deduction — the IRS will likely disallow the deduction and may treat it as a gift, triggering gift tax considerations for large amounts.

For the full strategy overview, see our guide on hiring kids in your STR business.

Disclaimer

This article is for informational purposes and does not constitute tax, legal, or financial advice. Tax rules vary based on your specific situation, filing status, entity structure, and jurisdiction. Always consult a qualified CPA or tax professional for guidance on your specific tax situation. IRS rules and thresholds are subject to change — verify current requirements at irs.gov before filing.