Child employment and how it corresponds to payroll taxes

Can I pay my child to work for the summer in my business and not withhold payroll taxes?

 

IRA rollover

Jan Puckett, CPA

Summer is just around the corner and for many businesses that can signal many things as people will have more leisure time on their hands. School will be out of session and many kids will be looking for work. In the same manner, many business owners who have children may employ their children at their business. When doing this, it is important to understand how this scenario is related to payroll taxes.

If the parent’s business is a sole proprietorship or a partnership with the only partners being the parents, there are certain exemptions for children under the age of 18 which allows them to be paid wages and not be subject to FICA withholding and Federal Unemployment Tax.

As the business owner you are still required to withhold Federal Income Tax on these wages. 

If the child is over the age of 17, but under age 21 they are only exempt from Federal Unemployment Tax. There are no exemptions for entities that operate as a C or S Corporation or a partnership in which the partners are not the child’s parents.

Before employing your child, you would want to consult your Murfreesboro tax advisor for the proper treatment.