Question: Susan pays her neighbor Alli to babysit her 5-year-old son and perform light housework two days a week. Alli will turn 18 on Dec. and is a full-time high school student. Alli meets the definition of being a household employee and Susan pays Alli in cash for the hourly work performed. Susan consistently pays Alli $240 per month, meaning that by the end of the year she will have paid Alli $2,880 for her services. Susan is trying to determine if she has an obligation to pay Social Security, Medicare or federal unemployment taxes. As a household employer, is Susan required to pay FICA and FUTA taxes for the wages paid to Alli?
Answer: No. Although Alli is considered Susan’s household employee and household employers are subject to FICA taxes if they pay the employee at least $2,700 during the year ($2,600 for 2023), Susan is not subject to FICA taxes on Alli’s wages because Alli was under age 18 during the year. IRC Sec. 3121(b)(21) and Notice 95-18 state that if an individual is under age 18 at any time during the year, their wages are exempt from FICA taxes as long as the household services are not their principal occupation. Because Alli is a full-time high school student, her job working for Susan is not considered her principal occupation, therefore, her wages are not subject to FICA taxes.
Susan also does not have to pay FUTA taxes for the wages she pays to Alli because she paid her less than $1,000 for each quarter.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.