How do I issue my minor child a w-2 and take the deduction on turbotax self employed? Aren't they exempt from SS and medicare under 18 working for sole proprietor parent.

[AmeliesUncle]

No.  As was pointed out, you need to issue W-2s, which require an EIN.  From the IRS Instructions for W-2s:

Who must file Form W-2.

You must file Form(s) W-2 if you have one or more employees to whom you made payments (including noncash payments) for the employees’ services in your trade or business during 2020.

Complete and file Form W-2 for each employee for whom any of the following applies (even if the employee is related to you).

• You withheld any income, social security, or Medicare tax from wages regardless of the amount of wages; or

• You would have had to withhold income tax if the employee had claimed no more than one withholding allowance (for 2019 or earlier Forms W-4) or had not claimed exemption from withholding on Form W-4; or

• You paid $600 or more in wages even if you did not withhold any income, social security, or Medicare tax.

https://www.irs.gov/instructions/iw2w3#idm[phone number removed]944

Other than that, yes, that is great idea to hire your children.  HOWEVER, be very cautious about how you do it.   For one thing, the payments to your children must be reasonable.  You said the business profits $40,000-$60,000 before paying the kids.  If your wife pays the kids $24,000, that leaves $16,000-$36,000 for your wife.  If the kids are doing about 1/2 of the work, that is fine.  But if your wife is doing 90% of the work, it is not reasonable for her to be paying 1/2 of the profits to the kids.  It could easily be viewed as a fraudulent setup. For another thing, you need to keep in mind that the kids' wages is THEIRS.  You can't spend that or even really dictate how they spend it.  It belongs to them.

Be sure you comply with all other requirements for employees.  You may need to post workplace posters because you have employees.  And State rules vary.  Although I suspect most cases don't require it, it is possible you would need to pay unemployment or worker's compensation.  So be sure to check what the rules are in your State in regards to employees who are your minor children.  Failure to follow all of the requirement could not only result in penalties for not complying, it could result in the IRS and/or state saying they children are not being treated as employees, therefore that would invalidate the deduction.

[rebecca98]

I paid my 17 y/o $3000 for the year. He used some of the money to fund a Roth IRA, so I want to file the W2 for a paper trail.  How exactly do I fill out the W-2?

Box 1 Wages $3000

Box 2 Fed tax w/h $0

Box 3 SS Wages $3000 or $0 ???

Box 4 SS Tax w/h $0

Box 5 Medicare Wages   $3000 or $0 ???

Box 4 Medicare Tax w/h $0

[RobertB4444]

Box 3 and 5 are the wages subject to Social Security and Medicare.  In this instance both boxes are 0 because no wages are subject to those taxes.

IRS guidance for parents employing minor children.

[RetireAt65]

So if kid is turning 18 in the middle of year (june 30th) , do we have to give  FICA for entire year or  not give at all

[RetireAt65]

So if kid is turning 18 in the middle of year (june 30th) , do we have to give FICA for entire year or not give at all

[Critter-3]

They are FICA free until their 18th birthday. 

[Critter-3]

They are FICA free until they turn 18 and then you must pay FICA for the rest of the year. 

[AliciaP1]

Once the child is 18 they are subject to FICA withholding and the business is responsible for the FICA match.  Withholdings and matching would start on July 1 in the situation you described.

[pc95035]

W2/W3 is filed at year end, right? My son left for college after just before he turned 18, is it possible to report w2/w3 for wages paid to him without FICA withholding for the months he was less than 18 today? Business service website  does not have drop-down for reporting 2022 W2/W3

[Critter-3]

The QEF tool will not add the 2022 tax year until January ... return then when you can access it thru the 2022 tax program.  

[pc95035]

Thanks- but does it matter in Jan 2023 kid will more than 18 , he turns 18 mid -November

[GG-88]

Regarding this part: "business profits $40,000-$60,000 before paying the kids.  If your wife pays the kids $24,000, that leaves $16,000-$36,000 for your wife.  If the kids are doing about 1/2 of the work, that is fine.  But if your wife is doing 90% of the work, it is not reasonable for her to be paying 1/2 of the profits to the kids.  It could easily be viewed as a fraudulent setup."   

--> What if you are paying your child as you training them, paid training, an investment in the company, so they can be the future of your company?  Let's say I have a single member LLC in bookkeeping business and business profit is 60k and paying two of my kids in total 16k (8k each) that year and, and  their  time spent is not direct billable to the client as some are flat rate clients, but they are helping out with simple data entry, looking up info and typing into spreadsheet  that helps me finish up the clients stuff, sorting and putting receipt together for my llc transactions, shredding, organizing, opening mails,  would this trigger anything paying them 8k each and my gross profit is 60k?  I am not seeing it as how much of their cost contributes to the gross profit, but taking in the cost as an investment to the company as they learn more and more of excel and data entry, I will be able to take on more clients in the future.   As well, if I file and report late on the federal 941/944 and EDD, will that cause any fee?  If the payment  to them will have zero tax impact since they are minor?  Is it too late to report for 2022?   Because some tax accountant say no W2 need and just cut them a check payment and deposit to their account.  I will have their time document, employment agreement and paying them the CA min wage.   As well, per the CA labor law, it states if the child work under parent and parent premises (home office), they are exempt from the CA child labor law requirement, permit requirement, and hour restriction.  Do you agree? 

See 

https://www.dir.ca.gov/dlse/childlaborlawpamphlet.pdf

page 33 or 53:

The only parent or guardian employers who are exempt from California child labor laws
are those who employ their minor children in agriculture, horticulture, viticulture or
domestic labor on or in connection with premises that the parent or guardian owns,
operates or controls. [LC 1394]

Will this trigger anything?  Because young kids (age 9-13) these days are computer savvy and it's best to utilized their time to train/work (1-2 each day) doing these spreadsheet, data entry, office work than to play games.   

[Opus 17]

@GG-88 

Generally speaking, the IRS expects you will pay a fair market wage for work actually performed.  That’s the wage you or a similar employer would pay a non-related employee for the same or similar work.  If you want to pay a different wage to family members, you should discuss your situation with a professional accountant.   

[GG-88]

@Opus 17  I am paying the CA minimum wage.  Would this be any issue employing and having paid training to my kids?   Same if I would hire outside employees, I’d provide paid training n start with min wage for no experience.  An investment to my company. As well, have you encounter this situation with parent employing their minor child?  If so, did they face any issue or have more risk for and audit?  Do you know of any tax employment professionals not too expensive and that specialized in tax advices /setup and employment? 

[Opus 17]

@GG-88 

As long as your children are performing legitimate work, I don’t know why you would be concerned about paying the minimum wage, that’s what minimum wage is for.