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The use of family labor in the farm or ranch operation can pose a number of challenges for farm managers as they try to sort through the vast quantity of regulations. While the day-to-day human-relations components of managing family members in the farm/ranch operation will differ substantially from that of non-family labor, the focus of this fact sheet will address the income tax and regulatory aspects of employing family members.
Generally, the wages that you pay to family members who are also your employees are subject to social security (FICA) and Medicare taxes, federal income tax withholding, and under certain circumstances, federal and state unemployment (FUTA/SUTA). Certain exemptions may apply for your child, spouse, or parent.1In addition, employers who pay less than $150 to one individual per year, or employers who pay less than $2,500 to all employees in one year may be exempt but there are exceptions to this rule. It is important that you understand these exceptions as noted in IRS publication 51.
Rural Tax Education
employment, family, members
Education | Higher Education | University Extension
Holcomb, C. Robert, "Employment of Family Members" (2017). Rural Tax Education. 26.