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IRS.gov Website
Publication 15
taxmap/pubs/p15-002.htm#en_us_publink1000202300

3. Family Employees(p12)

For Use in Calendar Year 2014
rule
taxmap/pubs/p15-002.htm#en_us_publink1000202301

Child employed by parents.(p12)

For Use in Calendar Year 2014
rule
Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21. However, see Covered services of a child or spouse, later in this section. Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to FUTA tax. Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work.
taxmap/pubs/p15-002.htm#en_us_publink1000202303

One spouse employed by another.(p12)

For Use in Calendar Year 2014
rule
The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, are not subject to social security, Medicare, and FUTA taxes.
taxmap/pubs/p15-002.htm#en_us_publink1000202304

Covered services of a child or spouse.(p12)

For Use in Calendar Year 2014
rule
The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for:
taxmap/pubs/p15-002.htm#en_us_publink1000202305

Parent employed by son or daughter.(p12)

For Use in Calendar Year 2014
rule
When the employer is a son or daughter employing his or her parent the following rules apply.
EIC
Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply:
  • The parent is employed by his or her son or daughter;
  • The son or daughter (the employer) has a child or stepchild living in the home;
  • The son or daughter (the employer) is a widow or widower, divorced, or living with a spouse who, because of a mental or physical condition, cannot care for the child or stepchild for at least 4 continuous weeks in a calendar quarter; and
  • The child or stepchild is either under age 18 or requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition.
Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided.