John is the sole proprietor of a furniture manufacturing business. His 18 year-old daughter Jane is an employee of the business and works alongside John in making the furniture. Jane earns $40.00 per hour. She works 40 hours per pay period. How much in FICA tax (7.65%) is withheld from Jane's paycheck per pay period? A. $61.20.

B. None of the other choices are correct.

C. $0.00

D. $24.80

E. $30.60

Correct option is (B)

Explanation:

As per IRS, if a child works in his / her parent's company, be it sole proprietorship or partnership firm (if all partners are the child's parents), he / she is not liable to pay FUTA for employing child below 21 years old. FICA taxes need to be paid if the child is above 18 years of age or above.

In this case, Jane is 18 years old and is working in her father's firm. She is not required to pay FUTA taxes, but 7.65% of her wages are withheld from her wages for FICA taxes as she is 18 years old.

Jane's income per period = $40 * 40 hours = $1,600

Amount withheld for FICA taxes = 0.0765 * 1,600

= $122.40