Payroll Taxes and Children Employed by Parents

Payments for the services of a child under age 18 aren’t subject to Social Security and Medicare taxes, if the business is a sole proprietorship or a partnership in which each parent is a parent of the child. Payments to a child under age 21 aren’t subject to FUTA. Payments are subject to income tax withholding, regardless of the child’s age.

Payments for the services of a child are subject to income tax withholding as well as Social Security, Medicare and FUTA taxes if they work for:

• A Corporation, even if it’s controlled by the child’s parent, or
• A Partnership, even if the child’s parent is the partners, unless each partners is a parent of the child.