Special Tax Treatment for Family Employees

Wages of children under 18 years of age who are employed in the family business are not subject to social security or Medicare taxes.  However, this holds true only if the family business is a sole proprietorship or a partnership in which both partners are parents of the children.

If the children are under 21 and perform only domestic services, they are not subject to social security taxes or Medicare taxes.  These domestic services must be performed for the parents though and be provided in the parents home only.

In addition to not being responsible for social security and Medicare taxes, the income of children who fall under either of the  categories above is not subject to federal unemployment tax.  However, this income may still be subject to federal income tax withholding.

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