Wages paid to child.

I live in Michigan and own a 2 small businesses. I have a teenage son who I would like to have work for me in my business. I have been told that wages paid to him are tax free up to a limit. First, am I correct so far? Next, what is the limit I thought I had heard $10,000. Next, does this mean that I don't have to withhold? What about FICA tax? Is the income taxable to him? Could you direct me to a place where I could look over the law and rules? Thanks for your help

Your child will be subject to income tax on his wages and you will have to withhold the tax (unless your child qualifies under the minimum wages requiring withholding). However, if your business qualifies under the rules below, the child is not subject to social security, Medicare or federal unemployment tax or withholding.

The following excerpts are from IRS Publication 15, Circular E, Employer’s Tax Guide, which I recommend as a source for further info, and which you can download for free at [url]http://www.irs.ustreas.gov/forms_pubs/index.html:[/url]

Child employed by parents. 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 services 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.


Covered services of a child or spouse. 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:
· A corporation, even if it is controlled by the child's parent or the individual's spouse,

·A partnership, even if the child's parent is a partner, unless each partner is a parent of the child,

· A partnership, even if the individual's spouse is a partner, or

. An estate, even if it is the estate of a deceased parent.