Special Federal Tax Exemptions in Payroll

Below are some examples of federal tax exemptions which are allowed by the Internal Revenue Service :

 

		FIT	FICA/ MEDICARE	FUTA
Sole Proprietor	The owner of the sole proprietorship pays income tax on all income. The owner also pays self-employment tax (Social Security/Medicare) on the sole proprietorship income.	Withhold	Withhold	Exempt
Minor under 18 employed by parent	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.	Withhold	Exempt	Exempt
Parent employed by child	Payments for the services of a parent in the son's or daughter's (the employer's) trade or business are subject to income tax withholding and social security and Medicare taxes.	Withhold	Withhold	Exempt
One spouse employed by another	The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax.	Withhold	Withhold	Exempt
F1/J1 Visa	Based on IRS Pub 519, F1, J1 students are exempt for up to five years during their status as a full time student in the United States for employment taxes.	Withhold	Exempt	Exempt
MQGE Pension Plan Participant (Social Security Exempt)	Employees whose services are not covered for Social Security but who are required to pay the Medicare-only portion of FICA are referred to as Medicare Qualified Government Employees (MQGE).	Withhold	Medicare Only	Withhold
Partner of a Partnership	Partners should include partnership items on their tax returns.	Withhold	Withhold	Withhold

 

For more current information on federal tax exemptions, please see the official websites of the Internal Revenue Service (IRS) and U.S. Social Security Administration

 

1. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Sole-Proprietorships

2. http://www.irs.gov/pub/irs-pdf/p519.pdf

3. http://www.ssa.gov/slge/mand_med_cov.htm

4. http://www.irs.gov/publications/p15/ar02.html

5. http://www.irs.gov/pub/irs-pdf/p541.pdf

 

 

 

Disclaimer : This article is written with the undertaking that tax rules and laws are constantly changing and the topic is updated at the publish date. 

We are not providing tax consulting.  For the most current information, please contact your accountant/tax consultant, call the tax agency or visit the state official website.