Every employee is subject to the FICA tax unless there is a specific exception. Internal Revenue Code section 3121(b)(21) provides that the FICA tax does not apply to domestic service performed in the private home of the employer by an employee under the age of 18, as long as the domestic service is not the principal occupation of the employee.
Being a student counts as a principal occupation. In other words, 17-year-old student babysitters and housekeepers do not have to pay into Social Security. However, a 17-year-old single mother who drops out of school would have to pay into Social Security for her work as a domestic (Congress came up with this example).
This exception was added to the Internal Revenue Code in 1994 by the Social Security Domestic Employment Act of 1994. Before the change, the FICA tax applied to anyone who earned more than $200 a year in domestic service, which greatly curtailed the pre-1994 babysitting industry. The employer might have paid in cash off the books, but obviously nobody ever did that because that would be illegal.
The Code says that the domestic service employee only has to be "under the age of 18 during any portion" of the year. Since most people age chronologically, this basically means the employee should be 17 or younger on January 1 of the year.
Most other child labor is subject to the 15.3% FICA tax in full. Older domestic service employees are subject to the FICA tax if they make more than $1,800 a year from such domestic service.
Section 3121 Definitions.
For purposes of this chapter, the term “employment” means any service, of whatever nature *** except that such term shall not include—
(21) domestic service in a private home of the employer which—
(A) is performed in any year by an individual under the age of 18 during any portion of such year; and
(B) is not the principal occupation of such employee.