Sole Proprietor employing Child not on Taxes

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Posts: 11
Joined: Wed Mar 15, 2017 10:44 am

Sole Proprietor employing Child not on Taxes

Post by dp102288 »

First I should say, hi to all. Long time browser, registered today because I've had some questions brewing. This place is great, I've learned so much just reading, & I have benefited much more. That being said...............

My father operates an LLC taxed as a sole proprietorship. He has several W2 employees already. My brother is 15 years old. We are in NJ. I had explained to both of them the tax benefits of hiring my brother, as opposed to a stranger, for part time paperwork, namely up to $6,300 in tax free income via the standard deduction for my brother, the deduction in business income. (I'd also like to get my brother into a Roth IRA.) Also the exemption of having to pay FICA & unemployment taxes on my brother's wages.

Some questions though:

My brother is claimed as a dependent on his mother's taxes. My mother & father are divorced, each filing separate taxes. The sole proprietorship is my father's. I do plan on having my brother file his own tax return.

1. Is it possible to claim the exemption for FICA taxes (for children) if my brother is not on my father's taxes?

2. Since the total wages will be less than the standard deduction, thus resulting in zero taxable income & zero tax liability, does income tax need to be withheld from my brother's paycheck? My brother had no tax liability last year (actually he has never filed taxes or had a "real" job).

3. (If anyone can help here also) I can't find good information on states taxes. I believe the NJ state exemption/deduction is only $1000, so I do believe my brother will have a state tax liability. But is there any higher exemption for children of a sole proprietorship? Does anyone also know about the state unemployment taxes?

Our tax guy isn't the best. I fight with him a lot. So I figure the minds here might be able to help.

Thank you.
Post Reply