Hiring your kid can be a smart money move for both of you. Just make sure to do your due diligence come tax time.

There can be numerous advantages to putting your child on the payroll. Business-owning parents can typically deduct wages paid to that child as an expense. Depending on your business structure and your child’s age, you may not owe Social Security, Medicare and unemployment taxes on payments to your young worker either, said certified public accountant John Wheeler, a senior financial consultant with Castle Wealth Advisors in Indianapolis.

“It’s a compounding benefit,” he said. “Mom and Dad are reducing the taxable income of the business … and are pushing money out of their highest tax bracket into the kid’s lowest tax bracket.”

Your child, meanwhile, will be receiving work experience along with earned income that could be contributed to an IRA on his or her behalf.

“Up to $6,300, it’s all tax-free to them, because they get the standard deduction,” Wheeler said.

Keep good records of the tasks your child does, as well as hours worked and payments you make, said Amy Wang, a senior technical manager on the American Institute of Certified Public Accountants’ tax advocacy staff. (It’s not just about taxes: The work must comply with federal and state laws governing child workers.)

Pay must be reasonable for the work done.

“If you’re audited, they will ask,” she said.

To make sure you don’t run afoul of the IRS, separate your roles as parent and employer. Earned income, for tax purposes as well as for any contributions to your child’s IRA, must be from a trade or business, Wang said.

“Household chores typically wouldn’t qualify,” she said.

Pay should be real wages, too — not pizza. In a 2014 tax court case, the judge ruled the defendant had improperly taken deductions for wages paid to her children in the form of tutoring service fees and dinners out.

“The IRS said that was not allowed, because a mom is obligated to feed her children,” Wang said.

Good records extend to tax time, too.

“You need to protect yourself, and document this correctly,” said Wheeler, who is also a certified financial planner. “You don’t want to put yourself at risk just for the sake of saving yourself a couple bucks in income taxes.”

At the start of tax season, generate a W-2 for your young employee instead of just claiming their wages as a deduction, he said.

Then close the loop by filing a tax return for your child. (You can still claim them as a dependent.) The IRS may not require your child to file based on details such as his or her income, he said, but it’s a smart precaution to head off IRS computer programs looking for unreported income.

“If you issue a W-2 to [your child] but then a tax return is not filed, it’s possible they could get a love-letter from the IRS,” Wheeler said.