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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29535
Experience:  Taxes, Immigration, Labor Relations
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My sister does a good amount of work my business and she is

Customer Question

My sister does a good amount of work my business and she is 17 years old. If I paid her a salary, of say, $4,500 for the whole year - would she have to file a tax return or pay taxes of any kind? And, in addition, would I have to pay any additional taxes (payroll) or anything else for paying her this salary? On my tax return what would I be reporting, what information of hers would I have to write down (name, address, SS#? etc) - please be detailed in your response.
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.

LEV :

Hi and welcome to Just Answer!
Yes - regardless of her age - that will be her taxable income. However - if that woudl be her only income - she is not required to wile her tax return - if you report that income as wages and will issue W2 form for her.

LEV :

However - if you report that compensation as self-employed contractor and will report it on form 1099MISC - then - she would need to file her tax return - and while she might not owe any income taxes - that income would be subject of 13.3% self-employment taxes.
On your tax return - you will deduct payments as business expenses on schedule C - www.irs.gov/pub/irs-pdf/f1040sc.pdf
Wages are deducted on line 26 and compensations to contractors are deducted on line 11.
You would need to collect from your sister signed form W9 - www.irs.gov/pub/irs-pdf/fw9.pdf
Most likely - you will report that compensation on 1099MISC form - www.irs.gov/pub/irs-pdf/f1099msc.pdf because there will be additional overhead for reporting wages and you might want to avoid it.
Let me know if you need any help.

LEV :

Be sure to ask for clarification if needed.