Like most wage-earning employees, your 16-year-old will most likely have to pay Social Security tax on her earnings. Of course, every rule has its exceptions. In this case, there are three. She may be exempt from paying Social Security taxes if she (1) works in the family business, (2) works in domestic service, or (3) delivers newspapers.
If you hire your child to work in your business, her earnings may be exempt from Social Security tax. She can take advantage of this exemption (up to her 18th birthday) only if your business is set up as either a sole proprietorship or a partnership where you and your spouse are the only partners. Child labor laws vary from state to state, though. Check with your state’s department of labor before putting your child on the books.
Full-time students who work as domestic servants (e.g., baby-sitters, landscapers, or chauffeurs) can also claim the Social Security tax exemption on those earnings, because the government considers your child’s education to be her principal occupation.
If your child chooses to deliver newspapers, her income will usually be exempt from Social Security tax (up to age 18) if she adheres to the following guidelines. She must deliver the newspaper, shopping guide, handbill, or other type of advertising material (not magazines) directly to the final consumer. This means that if your child is hired to fill newspaper boxes, she would pay Social Security tax on those earnings.
The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.