Business owners need to consider things besides family dynamics when hiring their parents or children. One of those things is employment taxes.
Child works for parent - When a child works for a parent's sole proprietorship or a partnership in which each partner is the child's parent:
In all types of company structures (the parent's C or S corporation, Non-parental partnership or estate) the employer treats the child's wages like those of any other employee.
Parents working for child – When a parent works for their child's sole proprietorship:
In all types of company structures, the child's entity treats the parent's wages like those of any other employee.
Parent's performing non-business services - If you hire your parent for childcare, payments for services of a parent are not subject to social security and Medicare taxes, unless the payments are for domestic services and each of the following apply:
This means a child's payments to a parent for childcare that enables the child to work aren't subject to social security and Medicare taxes.
Payments for a parent's personal services are not subject to FUTA.
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