If you hire your child, you get a business tax deduction for employee wage expenses. How Payroll Taxes Might Be Saved If your business isn’t incorporated and certain other conditions are met, your child’s wages are exempt from Social Security, Medicare and FUTA taxes. Your child must be under age 18 for this to apply (or under age 21 for the FUTA tax exemption). Contact us for how this works. Be aware that there’s no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes nonparent partners. And payments for the services of your child are subject to income tax withholding, regardless of age, no matter what type of entity you operate. Keep Accurate Records Hiring your child can be a tax-smart idea. Be sure to keep the same records as you would for other employees to substantiate the hours worked and duties performed (such as timesheets and job descriptions). Issue your child a Form W-2. Contact us with questions about how these rules apply to your situation. Issue 1, 2023 19
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