In 2007 minors can earn up to $5,350 tax free.

As described on page 75 of It’s How Much You KEEP, That Counts! Not how much you Make, if you hire your kids age 7-18 to work in your home-based business, the wages you pay them is tax deductible, and the money they earn from you - up to $5,350 - is tax free to them (and is not subject to the Kiddie Tax).

AND you don’t have to withhold any payroll tax on employees who are minors.