Generally, the wages you pay to family members who are your
employees are subject to employment taxes. However, certain exemptions
may apply to wages paid to your child, spouse, or parent.
Exemptions for your child.
Payments for the services of your child under age 18 who works for
you in your trade or business (including a farm) are not subject to
social security and Medicare taxes. However, see Nonexempt
services of a child or spouse, later. Payments for the services
of your child under age 21 who works for you, whether or not in your
trade or business, are not subject to federal unemployment (FUTA) tax.
Although not subject to social security, Medicare, or FUTA tax, the
child's wages still may be subject to income tax withholding.
Exemptions for your spouse.
Payments for the services of your spouse who works for you in your
trade or business are subject to income tax withholding and social
security and Medicare taxes, but not FUTA tax. However, payments for
the services of your spouse employed by you in other than a trade or
business, such as payments for household services in your home, are
not subject to social security and Medicare taxes or FUTA tax.
Nonexempt services of a child or spouse.
Payments for the services of your child or spouse are subject to
income tax withholding as well as social security, Medicare, and FUTA
taxes if he or she works for any of the following entities.
- A corporation, even if it is controlled by you.
- A partnership, even if you are a partner. This does not
apply to wages paid to your child if each partner is a parent of the
child.
- An estate, even if it is the estate of a deceased
parent.
In these situations, the child or spouse is considered to work
for the corporation, partnership, or estate, not you.
Exemptions for your parent.
Payments for the services of your parent employed by you in your
trade or business 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 in your trade or
business, but they do apply to payments for household services in your
home if:
- Your child lives in your home and is under age 18 or
requires adult supervision for at least 4 continuous weeks in a
calendar quarter due to a mental or physical condition, and
- You are a widow or widower, divorced, or married to a person
who, because of a physical or mental condition, cannot care for the
child during such period.
Wages you pay to your parent are not subject to FUTA tax,
regardless of the type of services provided.
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