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February 4, 2023
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How do I answer the question "Did you pay any employees in 2022" when I paid my minor children? I believe I answer No I Didn't

  • February 4, 2023
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Best answer by AliciaP1

It depends on how your business is structured and reported for taxes.

 

Per the IRS:

If the business is a parent’s sole proprietorship or a partnership in which each partner is a parent of the child:

  • Payments for the services of a child are subject to income tax withholding regardless of age.
  • Payments for the services of a child under age 18 are not subject to social security and Medicare taxes.  If the child is 18 years or older, then payments for the services of a child are subject to social security and Medicare taxes.
  • Payments for the services of a child under age 21 are not subject to Federal Unemployment Act (FUTA) tax.  If the child is 21 years or older, then payments for the services of a child are subject to FUTA taxes. 

You can see Family Help for more information.

2 replies

AliciaP1
AliciaP1Answer
February 4, 2023

It depends on how your business is structured and reported for taxes.

 

Per the IRS:

If the business is a parent’s sole proprietorship or a partnership in which each partner is a parent of the child:

  • Payments for the services of a child are subject to income tax withholding regardless of age.
  • Payments for the services of a child under age 18 are not subject to social security and Medicare taxes.  If the child is 18 years or older, then payments for the services of a child are subject to social security and Medicare taxes.
  • Payments for the services of a child under age 21 are not subject to Federal Unemployment Act (FUTA) tax.  If the child is 21 years or older, then payments for the services of a child are subject to FUTA taxes. 

You can see Family Help for more information.

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February 5, 2023

so the answer is yes if you take a deduction for what you paid them. you should also have filed w-2's  for their gross compensation even if not subject to FICA/Medicare or withholding. The IRS generally takes a dim view of treating your children as independent contractors (1099-NEC). 

***

see 1040 instructions in charts B & C as to whether returns need to be filed for your kids.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf