Appendix VI, Excluded Employee Status for State of Texas Unemployment Tax (SUTA) Payments

Revision 16-1; Effective March 14, 2016

 

http://www.twc.state.tx.us/ui/tax/law_ch2_02.html#2.2.5

 

Note: Only the employer makes contributions to unemployment taxes. The employee is not charged for unemployment taxes.

2.2.5 Relative, Service by

Under [Texas Workforce Commission] Section 201.065:

In this subtitle, employment does not include:

  1. service of an individual in the employ of the individual's son, daughter, or spouse; or
  2. service of an individual younger than 21 years of age in the employ of the individual's father or mother.

2.2.5.1 Father or Mother, Service by

Under Section 201.065, service performed by an individual for his or her son or daughter is excluded from the definition of employment. This exclusion exempts services performed by the father or mother of an individual employing unit. The exclusion is likewise applicable to services performed by a parent for a partnership if all of the partners are the children of the parent who performs the service.

[CDS: Excluded from the definition of employment = for purposes of calculating Texas state unemployment taxes (SUTA).]

[CDS: The employer (the son or daughter) must be at least 18 years of age and must not have a court-appointed guardian. A parent of a minor must be the employer in CDS. A court-appointed guardian must not be the employer in CDS. ]

This exclusion from the definition of employment has been extended to cover service performed by a step-parent for a step-child or step-children. It is a common practice to consider the relationship between a step-parent and a step-child as though there were a blood relationship.

[CDS: Step-parent must not be an employee to provide services through CDS to a step-child under the age of 18. The step-parent is the spouse of the employer.]

The exclusion from employment has also been extended to cover service performed by a foster parent for a foster child. The foster parent stands in 'loco parentis' to the natural parent, i.e., in place of the natural parent. Both the foster parent and the foster child have the (or some) of the rights that would exist if the relationship was natural, regardless of whether or not there have been legal adoption proceedings.

[CDS: A foster parent may be the employer with written authorization from the primary conservator of the individual receiving services, even if the foster parent is a co-conservator of the individual receiving services. Neither the foster parent or the spouse of the foster parent can be an employee in CDS.]

This exclusion from the definition of employment has likewise been extended to service performed by a father-in-law or mother-in-law of the individual employing unit [CDS: the employer] or to a partnership composed of two or more individuals who are sons-in-law or daughters-in-law of the person performing the service [CDS: the employee] [CDS: not applicable]. This is due to the provisions of the community property laws of Texas. For example, the father-in-law who performs service for his son-in-law is in reality performing part of his service for his daughter who owns an interest in the community property and business of her husband.

2.2.5.2 Spouse, Service by

Ordinarily this exclusion applies only to an individual employing unit. However, service performed for a partnership is excluded if an exclusion applies to all of the partners. For example, service performed by a woman for a partnership composed of her husband and her son. [CDS: Spouse of the employer must not be an employee in CDS.]

2.2.5.3 Son or Daughter, Service by

Services by a son or daughter under the age of 21 years are excluded from employment. [CDS: Employee must be at least 18 years of age. Exclusion applies only to employees 18 - 20 years of age. The exclusion expires when the employee turns 21 years of age.] This exclusion generally extends only to an individual employing unit [CDS: employer]. In some circumstances, however, it is possible under Texas law for a husband and wife to create a valid partnership. In such a situation, service performed for the two-member partnership by a son or daughter under the age of 21 years is exempt. [CDS: Does not apply.]

The exemption has not been extended to service performed by a minor child for his or her father-in-law or mother-in-law for the reason that there is no provision in the community property laws that would justify such an interpretation. [CDS: Employee must be at least 18 years of age.]

Notes:

  • If an employer is liable for SUTA (state unemployment tax), then all wages paid to an individual during the year are taxable. For example:
    • The employer is not liable in the first or second quarter for wages paid.
    • The employer becomes liable in third quarter.
    • Liability becomes retroactive back to the first quarter of the year.
  • If an employer is liable for SUTA, it does not matter how much the employer pays a specific individual (even just $1); all wages paid are taxable for SUTA.

Application to Consumer Directed Services:

  • Son or daughter receiving services must be the employer if age 18 or more and if the son or daughter does not have a court-appointed guardian.
  • An individual must be at least 18 years of age (an adult) to be an employer or to be an employee.
  • Spouse of the employer must not be an employee (except in CMPAS).
  • Parent of a minor (under age 18) must not be an employee. The parent must be the employer. Spouse of the parent must not be an employee.
  • The court-appointed guardian of the individual receiving services must not be an employee. The court-appointed guardian must be the employer.
  • The employer must not be an Employee.
  • The employer's spouse must not be an employee.

Notes:

  • The employer and employer-agent are responsible for TWC regulations. Check the TWC website and other TWC resources frequently for changes and revisions to regulations, forms, instructions, etc.
  • DADS is not liable for employer and/or employer-agent responsibilities related to Internal Revenue Service or other employment-related governmental agency regulations. Information provided in [brackets] is specific to CDS.