Payments for the services of a child under age 18 who works for his or her parent in a trade or business are NOT subject to Social Security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Payments for the services of a child under age 21 who works for his or her parent in a trade or business are NOT subject to Federal Unemployment Tax Act (FUTA) tax. Payment for the services of a child ARE subject to income tax withholding, regardless of age.
Wages paid must always be reasonable for the work performed. Also, a timesheet must be kept to document all hours worked.
The wages for the services of a child ARE subject to income tax withholding as well as Social Security, Medicare, and FUTA taxes if he or she works for:
1. A corporation, even if it is controlled by the child’s parent;
2. A partnership, even if the child’s parent is a partner, unless each partner is a parent of the child; or
3. An estate, even if it is the estate of a deceased parent.
For more information, please call our office today.
If you have questions about starting, growing, protecting, reducing business taxes, or selling your small business, please contact us. As a CPA, Certified Business Advisor, Small Business Consultant, and Advanced Certified QuickBooks ProAdvisor, we specialize in working with small business owners just like you and provide tax, accounting, financial analysis, management, business planning, and small business advisory services. We can advise you on how to start, manage, grow, and terminate a small business. For more information, call (727) 391-7373 or else visit us on the web at http://www.LindaStortzCPA.com.