If hiring your child for your business, keep these things in mind:
1. Must be real actual work for your business (not an allowance)
2. The work involved must be age appropriate.
3. They must be paid fairly (not more than someone else and not less)
4. Must follow DOL and NC Laws for hiring kids (note new laws for those with Alcohol permits)
5. Must have proper forms (w-4/ w-9 etc.)
Different tax rules for different business types do apply. When you hire your child to work for your business, the applicable taxes may vary depending on your business type. Regardless of age, however, payments to your child for work are subject to income tax withholding.
Business Type | Under Age 18 | Age 18 or Older |
Parent’s sole proprietorship | Not subject to Social Security and Medicare taxes | Subject to Social Security and Medicare taxes |
A partnership where each partner is a parent of the child | Not subject to Social Security and Medicare taxes | Subject to Social Security and Medicare taxes |
*If your child is under the age of 21 when working for your business that is a sole proprietorship or a partnership where each partner is a parent of the child, your child's pay would not be subject to Federal Unemployment Tax (FUTA).
Note: If your business is a corporation, partnership (not as described above), or estate, payments to your child are subject to income tax withholding, Social Security, Medicare, and FUTA taxes, regardless of the child’s age.
Remember to follow laws and document everything.
(Handy tip: put your child’s pay into a ROTH Account)
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