Do you have to issue a W2 to a child employee?

Question

Do you have to issue a w2 to a child employee that makes under $12,000??

Michael Plaks · Answer

@Patrick J.

I also do not agree with a recommendation to put your child on 1099, unless you really have some prodigy entrepreneur kid. In most cases, it's W2, however your under-18 child avoids FICA taxes which is a nice bonus.

Here is the official IRS page: https://www.irs.gov/businesses...

and here is a well-written blog post: https://www.nolo.com/legal-enc...

Eamonn McElroy · Answer

@Bill Hampton

Assuming OP is talking about a dependent child, very unlikely they would be appropriately classified as an IC and not an employee.

Do they set their own hours?  How many customers/clients do they have other than their own parents? Do they provide their own equipment?  Are free to do a specific job without instruction or guidance?  Are licensed, bonded, and have business insurance, as applicable?

Most dependent children would clearly be appropriately classified as employees.  Payroll should be run, and a W-2 issued the following year.

Michael Plaks · Answer

@Patrick J.

I can't understand why are you so reluctant to file the W2? It's a very simple task done online thru any of the dozens of providers, some for free. Google "eFiling W2" and choose a reputable one.

Besides simply being your legal requirement, this W2 legitimizes the payroll deduction for your business and allows your child to contribute to a Roth IRA. Just do it.

Colleen F. · Answer

My son worked for me  a while ago, he made under the standard deduction.  He kept track of hours each week and I issued him regular checks and generated a pay stub and W-2 for free.  To deduct you really need to do this and read the IRS publication. It wasn't hard. The most difficult thing was getting him to keep track of hours real time.

Michael Plaks · Answer

Takes more than that, but no need for a payroll service if you're willing to learn the steps yourself. See the link to Stephen Fishman's blog in my earlier response.

Eamonn McElroy · Answer

If you want to do this in a bonafide manner, I'd highly recommend you speak to your CPA.  Just cutting the child a check without issuing a W-2, without potentially reporting on the applicable Form 94x series (and state equivalents), without having a completed I-9 and signed contract on file...if I was an IRS auditor I'd deny the deduction, and claim the checks were gifts, and you'd have a very hard time proving me wrong.

Unless the child is going to be working a lot in your business, the juice may not be worth the squeeze here.  Focus on making money first before you start trying to DIY, or even consider advanced tax planning.

Patrick J. · Answer

@Michael Plaks

You're right. I was thinking I'd have to pay $40/month for payroll but I could just file it year end on my own as you're saying.

Patrick J. · Answer

@Basit Siddiqi

So do you think it doesn't need to be filed for a child employee making under the SD??

The only reason for filing would be if one were to get audited, the IRS would want proof that your child is an actual employee of the business. No FICA tax. No income tax under 12k.

Basit Siddiqi · Answer

@Patrick J.Being below the standard deduction hints at a tax return not being required.

Patrick J. · Answer

@Eamonn McElroy

Yes own kid. Just wondered if you had to file W2 if the income was under the standard deduction for a child. I guess medicare and ss would be run as $0 for payroll. Thanks.

Do you have to issue a W2 to a child employee?

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