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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7223
Experience:  15years with H & R Block. Divisional leader, Instructor
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Dear CPA,I need to employee my parents (US permanent residents/Green

Customer Question

Dear CPA,

I need to employee my parents (US permanent residents/Green card holders, age 62, living in California) at my small business to show some income for them to classify under low-income. This is a requirement to get medical benefits by a local community hospital. Without getting such income, they are classified as dependent on me and don't get medical coverage as they are under 65.

While setting their pay, we want to minimize any income and SSN taxes, etc.
They will file their annual tax return married-filing jointly.

1. Up to how much combined annual income they wouldn't be paying any Federal or California State Income tax?
2. Up to what annual income, they would be able to get some social security taxes back, etc.?
3. Any other points you suggest to take care while setting their income, etc.?

We don't have any issue with income etc for living. Just want to optimize to keep govt taxes low and maximize benefits for them.

So, I am trying to find what is the optimal level of annual salary I should set for them to minimize our tax liablity, etc. and maximize benefits to them.

Thanks
Kumar
Submitted: 11 months ago.
Category: Tax
Expert:  Robin D. replied 11 months ago.

Robin D :

Hello and thank you for using Just Answer,
If they have $19,500 of combined income they are required to file a tax return. Social Security taxes are not refunded like income taxes.
If you pay a household employee cash wages of more than the amount specified by law in a tax year ($1,800 for 2012 and 2013), you generally must withhold social security and Medicare taxes from all cash wages you pay to that employee. (Cash wages include wages you pay by check, money order, etc.) Unless you prefer to pay your employee's share of social security and Medicare taxes from your own funds, you should withhold 7.65 percent from each payment of cash wages made.

Robin D :

You will not need to pay FUTA on the wages to your parent. FUTA is unemployment tax.

Robin D :

I suggest you read this publication
http://www.irs.gov/pub/irs-pdf/p926.pdf

Robin D :

It will be most helpful for your obligations.

Expert:  Robin D. replied 11 months ago.
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Customer: replied 11 months ago.

Dear Robin,


 


Thanks for your reply and advise.


 


To clarify, my parents will be employed by my ice-cream retail store. It is a separate S-corporation. My parents employment will show work at store; not my house hold work.


 


Would all above points in your reply still apply to thsi situation? considering they will be employed for my s-corporation (legal entity for retail store of ice cream store). Thanks

Expert:  Robin D. replied 11 months ago.
Then you will follow the same income advised as in the original but treat them as you do any employees for wages and withholding.
Customer: replied 11 months ago.

Thanks Robin.


 


Last question, their income would be about $12,000 per year ($6K each).


 


Would they pay any income tax?

Expert:  Robin D. replied 11 months ago.
Not if they filed jointly and that was their only income.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7223
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 3 other Tax Specialists are ready to help you

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