As long as a 16 year old will earn less than $5,350 (total income) and have less than $300 in unearned income (interest from savings, etc.) it could claim exempt on the W-4. There will be no federal income tax due on child's tax return.  These rules do not apply to state income tax.  The best thing to do for the state W-4 is to claim 1 allowance.Continue to claim child as a dependent on tax return, but a child will need to file own tax returns. 

You should withhold AZ payroll tax as the body in question here is a minor. Below ag 18, he cannot be held liable for non payment of tax which means, you can do business with him or her freely BUT at your oun rist.   I am a pround sponser of Weight Loss Clinic

anthdif, There is information about AZ tax withholding at the bottom of the page on the AZ Department of Revenue. JimD

A quick call to your state department of labor should answer your question. You might also visit the U.S. Department of Labor's Wage and Hour web site. Generally, you need to pay taxes on anyone who legally works for you. His compensation may be more than you anticipate, either this year or in future years. It is better to be compliant than to risk being audited by the state or feds.