Setting an employee who is a minor

I'll help you set up the employee profile in QuickBooks, SMenterprises.

According to the IRS, "Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child." More details about this are discussed here: Family Help.

If you belong in this category, follow these steps on how to set it up: 

1. Go to the Employees menu and select Employee Center.
2. Click New Employee.
3. Enter all the necessary details in the Personal, Additional, and Employment tabs.
4. Proceed to the Payroll Info tab.
5. Enter the other required details such as Payroll Schedule, Pay Frequency, Earnings, and other payroll items. 
6. Click Taxes.
7. Select or uncheck taxes that apply or not applicable to your child.
8. Click OK. 

Let me also share these write ups for more details: 

• Legal Guidelines for Hiring Under-18 Workers
• The Tax Implications of Hiring Your Children

However, we still recommend reaching out to your accountant for additional advice about this. Some states have additional requirements such as the need for minor work permits and proof of age certifications.

You can also add a reply or visit us again if you need more help with QuickBooks. 

In the Earnings section of the Payroll Info tab, what does Item Name mean? I pay my child according to the jobs that are completed. How do I record that?

Thanks for the clarification, @SMenterprises.

Let me share some information about the Payroll Info tab. This is where you enter all the payroll information associated with the employee such as earning, taxes, sick, and vacation time.

The Item Name under the Earnings section is where you can add or select payroll items. QuickBooks uses these items to track individual amounts on your employee paycheck. These payroll items are for compensation, taxes, other addition and deductions, and company-paid expenses. 

To learn more about this, you can check out these articles for more details:

• Set up employee
• Get started with Payroll

Also, you’ll want to select the Commission as the compensation type under Item Name from the Earnings section. The commission is used to pay employees based on their performance. If you haven’t created a commission type of payroll item, you can follow these steps to do so:

1. Click the drop-down menu from the Item Name column.
2. Select Add New. 
3. Then select Commission and click Next.
4. Enter a name for the commission and click Next.
5. Select an account to track the expense and select Next.
6. Enter the rate of the item and click Finish.

I’d also recommend getting in touch with your accountant for guidance on which account to use and the correct rate to enter. They can also advise you about the additional requirement for minor workers' permits.

Once all is set, you can now create a paycheck for your employee. You can refer to this article for the complete details about this process: How do I create a paycheck for an employee?

Tag me in if you have follow-up questions about setting up your employee’s payroll information. I’m more than happy to help you out again. 

Taxes are still calculated on form 941. Why?

Glad to see you here, LRGC

As mentioned above, the payments for the services of a child under age 18 who works for their parent's business are not subject to social security and Medicare taxes only. Normally, if they have federal withholding, it will show in the 941 tax form.

If your employee qualifies for this rule, you'll want to make sure that the Social Security and Medicare options are unchecked in their profile. This way, QuickBooks won't calculate those taxes. Here's how:

1. Go to the Employees menu.
2. Choose Employee Center.
3. Open the profile of the appropriate employee.
4. Select the Payroll Info tab, then click Taxes.
5. Under the Federal section, uncheck the Social Security and Medicare options
6. Click OK, then select OK again. 

I'd also recommend reaching out to the IRS or consult an accounting professional to know the legal guidelines of hiring under-18 workers. In addition, here's an article that will help you in managing your employees in QuickBooks Desktop: Update or delete employee info.

Do you have any other questions in mind? Feel free to leave them below and I"ll get back to you as soon as I can.

I am trying to set-up two 16 year olds (that are not family) in Quickbooks Online Payroll and it is giving me an error in the personal information section when I enter their birthdate.  It won't let me continue to the next step even though I've looked into the rules of hiring minors in VA and I am complying with the regulations.  Any suggestions?