Child employed by parents
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. Refer to the "Covered services of a child" section below.  Payments for the services of a child under age 21 who works for his or her parent in a trade or business are not subject to Federal Unemployment Tax Act (FUTA) tax. Payment for the services of a child are subject to income tax withholding, regardless of age.

Covered services of a child
The wages for the services of a child are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for:

• A corporation, even if it is controlled by the child's parent,
• A partnership, even if the child's parent is a partner, unless each partner is a parent of the child, or
• An estate, even if it is the estate of a deceased parent.

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. Refer also to Husband and Wife Business.

Covered services of a spouse
The wages for the services of a spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for:

• A corporation, even if it is controlled by the individual's spouse, or
• A partnership, even if the individual's spouse is a partner.

Parent employed by child
The wages for the services of a parent employed by his or her child in a trade or business are subject to income tax withholding and social security and Medicare taxes. Wages paid to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. For additional employment tax information, refer to Publication 15, Circular E, Employer's Tax Guide, and Publication 51, Circular A, Agricultural Employer's Tax Guide.

If your parent works for you in your business, the wages you pay to him or her are subject to income tax withholding and social security and Medicare taxes. Social security and Medicare taxes do not apply to wages paid to your parent for services not performed in your business, but they do apply to domestic services if both the following conditions are met.

• Your parent cares for your child who lives with you and is under 18 or requires adult supervision for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition.

You are a widowed, divorced, or married to a person who, because of a physical or mental condition, cannot care for your child during that period.

IRS Offers Extension on Voluntary Disclosure of Hidden Offshore Accounts

The IRS isoffering a one-time extension of the deadline for voluntary disclosure by taxpayers with unreported income from hidden offshore accounts. Taxpayers now have until October 15, 2009 to make that disclosure, the IRS said.

Under rules issued in March, taxpayers with hidden offshore accounts originally had until Sept. 23 to report income.

"IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests," the agency said in an updated tax bulletin.

"The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions," the official IRS e-mail said.

Those who fail to report offshore income by the new deadline face civil penalties and possible criminal prosecution. The IRS also announced that there will be no further extensions. You can learn more at www.irs.gov and of course, http://www.sbtv.com/IRS