Vision Payroll

June 12, 2009

Question of the Week: Does a Sole Proprietor Have to Pay Payroll Taxes on Children’s Wages?

This week’s question comes from Brad, a sole proprietor. My 16-year-old daughter will be out of school soon and I’d like to hire her for the summer in my sole proprietorship. Does a sole proprietor have to pay payroll taxes on children’s wages? Answer: Sole proprietors who hire their own children under age 18 do not have to pay federal employment taxes on the children’s wages. The children are exempt from having to pay social security and Medicare taxes on their wages. These taxes are sometimes known as FICA (Federal Insurance Contributions Act) or OASDI (Old-Age, Survivors, and Disability Insurance). The employer is also exempt from paying the matching portion of these taxes. Additionally, the employer is not required to pay FUTA (Federal Unemployment Tax Act) tax on these wages. Most states also exempt such wages from state unemployment tax (SUTA). Depending on their expected income, children of sole proprietors may be subject to federal and state income tax withholding. Contact Vision Payroll if you have any questions on payroll taxes on children.

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