Q What is the minimum amount per quarter that I can pay a part-time employee (family member) without having to pay taxes? In the past I thought it was $250 per quarter. Is that still correct?
A If the family member is an employee of a family-owned business, you are responsible to treat him or her as an employee for all purposes including unemployment insurance, workers' compensation, federal and state income tax withholding, and FICA taxes. There is no real exemption, per se, that I am aware of in your situation. The $250 amount you may be referring to may relate to federal income tax withholding as determined based on a Form W-4 that your family member should submit to you. If he/she only makes a small amount of money (from all sources) during the year and therefore will not be subject to a requirement to file a Form 1040 for the year, then s/he may indicate on the Form W-4 that s/he qualifies for exemption from federal income tax withholding and you won't have to withhold. There is probably a similar exemption available at the state level. But this exemption does not apply to FICA and I don't believe it applies to workers compensation laws or unemployment insurance. Those laws have their own set of rules outside of tax law and usually define by statute who must be covered under an insurance policy (workers' comp) and under the unemployment insurance laws. But check with your state regarding those latter two issues. This answer may also depend on what type of business you operate and what the family member's duties are and where her place of work is.
SBA CHAT This question and answer is from “Tax Planning & Preparation for Small Businesses,” an online chat that took place December 22, 2005 on the Small Business Administration Web site: www.sba.gov. The host for this session was Thomas P. Ochsenschlager, vice president of taxation with the American Institute of Certified Public Accountants. The theme of the next online chat is “Women Entrepreneurs.” It takes place in March. For specific date and time information, go to the Web site and click on “Your Small Business Voice Online Chat.”