Family Employees - USA

Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ), Page 7

If your employee is a member of your family, use the following rules to determine if his or her wages are subject to employment taxes.

Employing your child. Payments for the services of your child under the age of 18 who works for you in your business are not subject to social security and Medicare taxes. If these services are for work other than in your business, such as domestic work in your private home, they are not subject to social security and Medicare taxes until your child reaches 21.

Payments for the services of your child under the age of 21 who works for you whether or not in your business are not subject to FUTA tax.

The above rules apply even if you pay your child regular wages. The wages for these services are not subject to social security, Medicare, or FUTA taxes. But they may still be subject to income tax withholding.

Employing your spouse. If your spouse works for you in your business, the wages you pay to him or her are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. However, the services of your spouse employed by you in other than your business, such as domestic service in your private home, are not subject to social security, Medicare, and FUTA taxes.

Employing your parent. If your parent works for you in your business, the wages you pay to him or her are subject to income tax withholding and social security and Medicare taxes. Social security and Medicare taxes do not apply to wages paid to your parent for services not performed in your business, but they do apply to domestic services if both the following conditions are met.

• Your parent cares for your child who lives with you and is under 18 or requires adult supervision for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition.

• You are a widowed, divorced, or married to a person who, because of a physical or mental condition, cannot care for your child during that period.

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This page last modified: 15 Mar 2008