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My son has a cleaning business and has hired several people

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to assist in the cleaning...
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: 8 years ago.Category: Tax
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Answered in 1 hour by:
8/2/2009
Tax Professional: Marvin,EA, Enrolled Agent replied 8 years ago
Marvin,EA
Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1,672
Experience: Enrolled to Represent Taxpayers Before The IRS
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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.
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Customer reply replied 8 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?
Tax Professional: Marvin,EA, Enrolled Agent replied 8 years ago

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

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Customer reply replied 8 years ago
Thanks.
Customer reply replied 8 years ago
I'll wait for the next expert to answer the question. Thanks.
Tax Professional: Lev, Tax Advisor replied 8 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
Experience: Taxes, Immigration, Labor Relations
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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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Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
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