Family Employees

Generally, the wages you pay to family members who are your employees are subject to employment taxes. However, certain exemptions may apply to wages paid to your child, spouse, or parent.

Exemptions for your child. Payments for the services of your child age 17 or younger who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. However, see Nonexempt services of a child or spouse, later. Payments for the services of your child age 20 or younger who works for you, whether or not in your trade or business, are not subject to federal unemployment (FUTA) taxes. Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to income tax withholding.

Exemptions for your spouse. Payments for the services of your spouse who works for you in your trade or business are subject to income tax withholding and social security and Medicare taxes, but not FUTA tax. However, payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes.

Nonexempt services of a child or spouse. Payments for the services of your child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities.

• A corporation, even if it is controlled by you.
• A partnership, even if you are a partner. This does not apply to wages paid to your child if each partner is a parent of the child.
• An estate, even if it is the estate of a deceased parent.

In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you.

Exemptions for your parent. Payments for the services of your parent employed by you in your trade or business are subject to income tax withholding and social security and Medicare taxes. Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied.

• Your child lives in your home and is age 17 or younger or requires adult supervision for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition.
• You are a widow or widower, divorced, or married to a person who, because of a physical or mental condition, cannot care for the child during such period.

Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided.

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