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Lev
Lev, Tax Advisor
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My son has a cleaning business and has hired several people

Customer Question

My son has a cleaning business and has hired several people to assist in the cleaning and painting. If they are paid less than $200 each does he have to pay taxes for them?
Submitted: 5 years ago.
Category: Tax
Expert:  Marvin,EA replied 5 years ago.
Hello and thank you for using Just Answer. Your son must pay FICA tax in the amount of 6.2%, Medicare tax in the amount of 1.45% and Federal unemployment tax in the amount of 6%( on wage up to $7,000) regardless of the amount his employees earned. IRS Pub.15, www.irs.gov/pub/irs-pdf/p15.pdf and www.irs.gov/pub/irs-pdf/p15a.pdf explain the forms your son must file quarterly.
Customer: replied 5 years ago.
He is paying them $7.25/hr and some are paid after 2 days work ( only worked 2 days and asked not to come back due to poor work) so he did't take out taxes on their first money. What should he do now? Does he need to pay their portion too? And if yes, how much?
Expert:  Marvin,EA replied 5 years ago.

I am going have someone who know more about payroll tax to answer your question.

Customer: replied 5 years ago.
Thanks.
Customer: replied 5 years ago.
I'll wait for the next expert to answer the question. Thanks.
Expert:  Lev replied 5 years ago.

Hi,

there is no minimum pay to avoid income tax liability - any payment should be included into person's income for income tax purposes - that income should be added to other taxable income and tax liability is calculated based on the total income.

If the total income is below certain level - there is no federal tax liability.

For single person who is not a dependent - such level is $5700+$3650=$9350 (for 2009)

 

If these people are paid as employees - your son should issue W2 form to them at the end of the year and withhold FICA taxes regardless of the amount they are paid.

There is no minimum pay limit.

 

If these people are self-employed contractors - you son do not withhold any taxes from the paycheck and issue the form 1099-misc at the end of the year.

He doesn't require to issue that form if the person is paid less than $600 per entire year.

However - the recipient still need to report that amount on his/her tax return and it is a subject of income tax.

 

Let me know if you need any help.

 

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