Parent's employing children

[tax123]

I understand that a child employed by a parent in a family business organized as a sole proprietorship is exempt from FICA until age 18 and FUTA until age 21. For a situation like this does the parent need to give the child a W-2 at the end of the year? And where should this amount be located on Schedule C?

Thanks for your input!

[spanel]

I understand that a child employed by a parent in a family business organized as a sole proprietorship is exempt from FICA until age 18 and FUTA until age 21. For a situation like this does the parent need to give the child a W-2 at the end of the year? And where should this amount be located on Schedule C?

Thanks for your input!

W2 Wages = W2 generated. The W2 goes on the childs return if necessary. Sch C deduction as wages.

Chris

[tax123]

That was my thought too. So they have not given their child a W-2. Does that need filed before their tax return can be completed?

[Burke]

They should complete the W-2. It also would establish earned income for the child to qualify him for an IRA deduction if he so desired.

[tax123]

So am I correct that in this case the W-2 is only going to have an amount in box 1 and box 16, since they are exempt from FICA and no federal or state withholding took place?