Generally, any person or business that pays wages to an employee must file a Form 941 each quarter, and must continue to do so even if there are no employees during some of the quarters. The only exceptions to this filing requirement are for seasonal employers who don’t pay employee wages during one or more quarters, employers of household employees and employers of agricultural employees. See the link to determine if your child is considered a household employee.
One of the advantages of operating your own business is hiring family members. However, employment tax requirements for family employees may vary from those that apply to other employees. Your child can earn up to $12,950 (in 2022) tax-free.
Employment Taxes for Children Employed by their 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 partner 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 a partner, unless each partner is a parent of the child.
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