Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

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Topic Author
goGators
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Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by goGators »

Hi,
A friend has an LLC and his son working for him. Does he need to issue a W-2 form if his son's income was less than $12K (below the 2018 standard deduction)?
Thank you.
Sidney
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by Sidney »

FICA is owed on first dollar, right?
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SRenaeP
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by SRenaeP »

In short, yes. Also note there is a penalty for not issuing/filing a W-2 when required. What you didn't mention that is also important, is your friend's son actually an employee or a contractor to his father? The answer to that question determines whether he is owed a W-2 or 1099.

Per the IRS, emphasis mine -

Who must file Form W-2. You must file Form(s) W-2 if you have one or more employees to whom you made payments (including noncash payments) for the employees’ services in your trade or business during 2019.
Complete and file Form W-2 for each employee for whom any of the following applies (even if the employee is related to you).
• You withheld any income, social security, or Medicare tax from wages regardless of the amount of wages; or
• You would have had to withhold income tax if the employee had claimed no more than one withholding
allowance or had not claimed exemption from withholding on Form W-4; or
You paid $600 or more in wages even if you did not withhold any income, social security, or Medicare tax.
Topic Author
goGators
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by goGators »

...
That means you can hire your under-age-18 child (as a legitimate employee) and his or her wages will be exempt from Social Security tax, Medicare tax, and federal unemployment (FUTA) tax. In fact, the FUTA tax exemption lasts until your employee-child reaches age 21.
...
https://www.marketwatch.com/story/the-n ... 2018-06-04
Topic Author
goGators
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by goGators »

SRenaeP wrote: Mon Feb 18, 2019 8:59 am ... What you didn't mention that is also important, is your friend's son actually an employee or a contractor to his father? ...
The son is an employee but also a minor (less than 18 of age). Based on the link I posted above, there is no FICA or FUTA required. He also made less than $12k/ year and therefore will not owe any federal income tax. Given those conditions, is a Form W-2 necessary?

So I think it's a yes, according to this requirement
SRenaeP wrote: Mon Feb 18, 2019 8:59 am ...
• You paid $600 or more in wages even if you did not withhold any income, social security, or Medicare tax.
...
Last edited by goGators on Mon Feb 18, 2019 9:19 am, edited 1 time in total.
nolesrule
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by nolesrule »

goGators wrote: Mon Feb 18, 2019 9:01 am
...
That means you can hire your under-age-18 child (as a legitimate employee) and his or her wages will be exempt from Social Security tax, Medicare tax, and federal unemployment (FUTA) tax. In fact, the FUTA tax exemption lasts until your employee-child reaches age 21.
...
https://www.marketwatch.com/story/the-n ... 2018-06-04
From the final paragraph in the article you linked to...
Hiring your child can be a tax-smart idea. Remember, however, that the child’s wages must be reasonable for the work performed. So the hire-the-kid strategy works best with teenage children who can be assigned meaningful tasks. Keep the same records as for any other employee to substantiate hours worked and duties performed (e.g., timesheets and job descriptions), and issue your child an annual Form W-2 just like any other employee.
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goGators
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by goGators »

nolesrule wrote: Mon Feb 18, 2019 9:16 am
From the final paragraph in the article you linked to...
Hiring your child can be a tax-smart idea. Remember, however, that the child’s wages must be reasonable for the work performed. So the hire-the-kid strategy works best with teenage children who can be assigned meaningful tasks. Keep the same records as for any other employee to substantiate hours worked and duties performed (e.g., timesheets and job descriptions), and issue your child an annual Form W-2 just like any other employee.
Thank you for pointing that out. I saw that too but was not 100% sure in the case with no income tax owed but SRenaeP pointed out the $600 limit above.
livesoft
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by livesoft »

I'd want the W-2 to prove eligibility for IRA contributions.
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Topic Author
goGators
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by goGators »

I'm just curious about the $600 limit. If I were to pay my neighbor's kid more than $600 last year for doing yard works (mowing lawn, shoveling snow...) would I be required to give him a W-2 form?
nolesrule
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by nolesrule »

goGators wrote: Mon Feb 18, 2019 9:45 am I'm just curious about the $600 limit. If I were to pay my neighbor's kid more than $600 last year for doing yard works (mowing lawn, shoveling snow...) would I be required to give him a W-2 form?
Was he an employee or contractor?
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RickBoglehead
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by RickBoglehead »

goGators wrote: Mon Feb 18, 2019 9:45 am I'm just curious about the $600 limit. If I were to pay my neighbor's kid more than $600 last year for doing yard works (mowing lawn, shoveling snow...) would I be required to give him a W-2 form?
No. A W-2 is for an employee. The teenager would be an independent contractor, not an employee. You have nothing to do. The neighbor's kid on the other hand does have to report his income to the IRS.
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Spirit Rider
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by Spirit Rider »

nolesrule wrote: Mon Feb 18, 2019 9:50 am
goGators wrote: Mon Feb 18, 2019 9:45 am I'm just curious about the $600 limit. If I were to pay my neighbor's kid more than $600 last year for doing yard works (mowing lawn, shoveling snow...) would I be required to give him a W-2 form?
Was he an employee or contractor?
This neighbor's kid should almost certainly be considered a household help employee. If you paid them >= $600 in wages you are required to file a W-2.

If they are < age 18 and a student, there is no FICA/FUTA regardless of the amount of wages. Otherwise, FICA/FUTA is only required if the wages are >= $2100.

Also, there was no need for income tax withholding, because no tax would be due <= $12K. Just to be safe, you should have them fill out a W-4 claiming exemption to withholding.

In almost all cases it is totally wrong to classify them as an independent contractor. They could only be considered an IC if they were running a business servicing many homes.

Even then it makes no sense to subject them to the 15.3% self-employment tax. This myth continues to persist and I think is mostly laziness on the part of homeowners

There are many online services that will file a W-2 electronically to the IRS and mail a W-2 to the employee for about $5 -$10.
Topic Author
goGators
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Re: Is a Form W-2 required if there is no FICA, FUTA, and income tax owed?

Post by goGators »

Spirit Rider wrote: Mon Feb 18, 2019 10:20 am There are many online services that will file a W-2 electronically to the IRS and mail a W-2 to the employee for about $5 -$10.
Thank you. I googled for online services and found
https://www.thebalancesmb.com/how-to-fi ... ine-397970
...You can e-file W-2 forms online at the SSA's Busines Services Online (BSO) website. It is free and secure...
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