Employee Under 18

[Edsel]

Taxpayer wants to employ grandchild who turns 18 during year.  His birthday is June 1.  Until June 1st he is paid $2500, and he is paid $3000 on payrolls after June 1.

Which of the following are true for his W-2 wages?

1. His Total wages are $5500, and $3000 is taxable for Social Security Wages.
2. His Total wages are $5500, and $5500 is taxable for Social Security Wages.  Turning 18 at any time during the year is construed as turning 18 on January 1 of that year for social security wage purposes.
3. His Total wages are $5500, and  $ 0 is taxable for Social Security Wages.  Turning 18 at any time during the year is construed as turning 18 on January 1 of the succeeding year for social security wage purposes.

[Medlin Software, Dennis]

4. Taxable, IIRC grandchildren employees do not get the family exception.  Of course, I am of the thought using the exception is not a good idea when the wages are not trivial.  Less zero years for SS calculations, should benefits be needed before (if) the year drops out of the calculations.

[jklcpa]

Medlin is correct IF this isn't for household help.  The employer isn't the child's parent, so that rule wouldn't apply and the entire $5,500 would be taxable for SS and Medicare.

However, IF this is for household help, see the rules on this page that detail the age issue regarding SS/Medicare withholding:  https://www.irs.gov/taxtopics/tc756

 

 

 

[Edsel]

Thanks for the responses.  I learn something new every day.

[Medlin Software, Dennis]

"I learn something new every day."

I try as well.  I had not thought about household help, as it is not something I run across often.  One of my umpire mentors always said it is better to be on the way up - the two choices were to be on the way up (learning), or on the way down (not learning)...

[Lion EA]

I think a parent can hire his/her child with FICA exemption and age restrictions, including a husband-wife only partnership. But, not an S- or C-corporation, even if parent is only shareholder.