If you gave your daughter $1,200 as a gift in appreciation for her help, you can not deduct it as a business expense. Also, in that case, there would have been no requirement that you get an EIN and file the employment tax forms (although there probably would have been no requirement to withhold income tax, and there is no withholding of SS and Medicare when a child under 18 works for a parent in a sole proprietorship). So if you do deduct the amount as wages, you will have to file the proper employment tax forms, even if no money is due. For details, see IRS Publication 15, Employer’s Tax Guide, which you can download for free at the IRS site at:
http://www.irs.ustreas.gov/forms_pubs/index.html
If she was an independent contractor, then you could deduct the $1,200 as a business expense.
See Pub. 15-A, Employer's Supplemental Tax Guide, which you can download at the above site, for more information on how to determine whether an individual providing services is an independent contractor or an employee.
