Roth IRA for children

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ChicagoMedStudent
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Roth IRA for children

Post by ChicagoMedStudent » Thu May 21, 2020 6:03 pm

Hi everyone,

I have questions about opening a Roth IRA for my child. I've searched previous posts about this topic on the forum but they've all been pretty confusing.

Note: for the purposes of this question I am assuming other tax advantaged accounts have already been maxed out, so a child's Roth IRA is not being privileged over some other more sensible investment option.

1) Why not open a Roth IRA for my child as soon as she is old enough to do anything that could be considered work? For example, payment for cleaning around the house, yard work, etc. Here I'm not interested in opinions on whether or not it is right to pay a child for certain chores/work or, but whether it is defensible from a tax perspective and if there are other investment options that are clearly better.

2) A recurring topic in previous threads was paying the child a fair wage. One apparently simple set-up would be to set up a schedule of work and chores such as house cleaning, yard work, bathing/grooming the dog etc, and at $125/week for 48 weeks we have the current Roth limit of $6,000 (l'll give her 4 weeks vacation, I'm not a monster). What would be drawbacks or liabilities with this setup?

The main issue I see is that when she turns 18 she can do whatever she wants with the money, including wasting it. Are there other financial/tax issues that make a plan like this either ill-advised or legally dubious?
Passions are the only orators which always persuade. - François de La Rochefoucauld

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F150HD
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Re: Roth IRA for children

Post by F150HD » Thu May 21, 2020 6:13 pm

lol.....Getting in on this one early.

milosz19
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Re: Roth IRA for children

Post by milosz19 » Thu May 21, 2020 6:20 pm

You can totally do it and I like your thinking here. :sharebeer
I was listening to Paul Merriman podcast this week and he had some questions from a guy who opened a Roth for an 8 year old.

The question here is at what point, as an employer, are you obligated to pay social security taxes for your employee (your child in this case)? Anyone?

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ChicagoMedStudent
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Re: Roth IRA for children

Post by ChicagoMedStudent » Thu May 21, 2020 6:23 pm

milosz19 wrote:
Thu May 21, 2020 6:20 pm
The question here is at what point, as an employer, are you obligated to pay social security taxes for your employee (your child in this case)? Anyone?
Yes this brings up a point I meant to ask: are there potential taxes we would have to pay such as social security or other kinds that would make the investment overall not worth it? And are there certainemployment arrangements that are more or less favorable from a tax standpoint?
Passions are the only orators which always persuade. - François de La Rochefoucauld

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Re: Roth IRA for children

Post by retired@50 » Thu May 21, 2020 6:31 pm

ChicagoMedStudent wrote:
Thu May 21, 2020 6:23 pm
milosz19 wrote:
Thu May 21, 2020 6:20 pm
The question here is at what point, as an employer, are you obligated to pay social security taxes for your employee (your child in this case)? Anyone?
Yes this brings up a point I meant to ask: are there potential taxes we would have to pay such as social security or other kinds that would make the investment overall not worth it? And are there certainemployment arrangements that are more or less favorable from a tax standpoint?
The child has to have earned income (like W-2 wages) for the Roth IRA to be an option. This would require all the relevant paperwork, taxes, etc. Unless your child is employed with a legitimate employer as a child model or a child actor this seems like a stretch. There is also compliance with child labor laws in your state. This "theory" has been conjured up by many a parent, but I wouldn't recommend getting your kid into hot water with the IRS before she turns 18.

Regards,
This is one person's opinion. Nothing more.

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Re: Roth IRA for children

Post by 02nz » Thu May 21, 2020 6:34 pm

I think it's important to teach children about finances, and even if your child qualifies to contribute to a Roth IRA, retirement savings would not be at or near the top of the priority list in terms of what they should learn. I would focus on other, more basic personal finance topics and tasks with your child. When they start to make money (part time job, work-study in college), start a Roth IRA then and give them a match for investing in the Roth IRA. This not only gets them started early with retirement savings, it gives them money to invest when they face (likely) the lowest tax rates of their lives and when they otherwise would probably not have the spare cash to invest.

milosz19
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Re: Roth IRA for children

Post by milosz19 » Thu May 21, 2020 6:41 pm

OK, this has sparked my interest now:

When you pay at least $2,200 in wages to a household worker, you must do all of the following:
• Deduct Social Security and Medicare taxes from those wages.
• Pay these taxes to the Internal Revenue Service (IRS).
• Report the wages to Social Security

At this threshold, the kid will need to file, but will not pay federal income taxes.

rkhusky
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Re: Roth IRA for children

Post by rkhusky » Thu May 21, 2020 9:11 pm

Payment for household chores does not qualify for Roth IRA contributions for your child. Nor do you have to pay income tax, SS, UI, L&I, etc.

The child does chores because he is a member of the family. Any compensation is a gift.

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Re: Roth IRA for children

Post by Motor » Thu May 21, 2020 9:48 pm

You're going to need to get the IRS guidelines and follow them, but the idea is a great one to me. The flexibility of the Roth is great. Documentation is key for the IRS. Babysitting, chores for neighbors, all of that qualify I believe.

I am a sole proprietor of a business. My children work for me and I pay them monthly by check and they have a time sheet. Amazon warehouse now pays at least $15 an hour, so that's an reasonable starting base pay for the work they complete for me. Research it, do it!!

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Re: Roth IRA for children

Post by Ewb » Thu May 21, 2020 10:57 pm


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Re: Roth IRA for children

Post by TropikThunder » Thu May 21, 2020 11:48 pm

Ewb wrote:
Thu May 21, 2020 10:57 pm
Recommend you thoroughly review the IRS section
https://www.irs.gov/publications/p926#e ... k100086734

And these two articles discuss further
https://www.marottaonmoney.com/fund-you ... re-income/
https://www.marottaonmoney.com/how-to-f ... ing-money/
I'd be hesitant to rely on the first Marotta article, mainly because she says "if" so many times that it's basically 2,000 words of speculation that never comes out and says "chore money counts as earned income". Everything I've ever read on the subject says no, paying your own kids for chores around the house does not count as earned income. If they mow your grass, no. If they mow your neighbor's grass, yes.

As for the IRS reference, the table exempts your spouse and your child from employment taxes regardless of how much they are paid, which always implied to me that it was to be considered unearned income. But I'm not a CPA.

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Re: Roth IRA for children

Post by rkhusky » Fri May 22, 2020 7:20 am

Here is a vote for "No" from a former tax lawyer, based on the fact that money for household chores is not considered taxable compensation, which is required for a Roth IRA contribution (https://www.irs.gov/taxtopics/tc309).

https://fairmark.com/retirement/roth-ac ... or-minors/

edit: A red flag on the marottaonmoney article is that the author doesn't use the correct terminology (earned income vs taxable compensation) for Roth IRA eligibility. Although I wonder what would be considered earned income, but not taxable compensation.

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Re: Roth IRA for children

Post by TomatoTomahto » Fri May 22, 2020 8:08 am

I have to wonder, if it were that easy, wouldn’t so many more people be doing it and bragging about it?

Aside from some outliers (e.g., actors and models that are actually appearing in ads or web sites), most of the proposals are unlikely to fly with the IRS. You might not get popped, but ...

Disclosure: when my kids earned legitimate income in college (W2 reported by an arms length employer), I matched funds to make their Roth contributions easy for them.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Roth IRA for children

Post by jebmke » Fri May 22, 2020 9:26 am

ChicagoMedStudent wrote:
Thu May 21, 2020 6:03 pm
l'll give her 4 weeks vacation, I'm not a monster
If I were her I'd hold out for six weeks vacation and a gym membership.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Roth IRA for children

Post by ChicagoMedStudent » Fri May 22, 2020 9:38 am

rkhusky wrote:
Fri May 22, 2020 7:20 am
Here is a vote for "No" from a former tax lawyer, based on the fact that money for household chores is not considered taxable compensation, which is required for a Roth IRA contribution (https://www.irs.gov/taxtopics/tc309).
So is there no distinction between various types of household work from a tax perspective? For example, putting away one's toys is one thing, but giving the dog a bath and brushing him and brushing his teeth is something we might pay $50 for at a groomer. are these two things considered fundamentally the same just because it's done within the home and I'm paying her?
Passions are the only orators which always persuade. - François de La Rochefoucauld

rkhusky
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Re: Roth IRA for children

Post by rkhusky » Fri May 22, 2020 10:11 am

ChicagoMedStudent wrote:
Fri May 22, 2020 9:38 am
rkhusky wrote:
Fri May 22, 2020 7:20 am
Here is a vote for "No" from a former tax lawyer, based on the fact that money for household chores is not considered taxable compensation, which is required for a Roth IRA contribution (https://www.irs.gov/taxtopics/tc309).
So is there no distinction between various types of household work from a tax perspective? For example, putting away one's toys is one thing, but giving the dog a bath and brushing him and brushing his teeth is something we might pay $50 for at a groomer. are these two things considered fundamentally the same just because it's done within the home and I'm paying her?
If she had a business where she groomed other people’s dogs for money, it might work. But she would have to follow all the rules of a legitimate business and pay employment taxes.

Just because you would pay someone else to do something is not adequate. You might pay someone to cook your food, wash your dishes, vacuum, make your bed, mow your yard, wash your car, etc.

If you can find some instance where the IRS considered parents paying their children to do these things to be taxable compensation and required the children to pay tax on the money, you would have a case.

Note that Congress saw fit to enact a law that a non-working spouse could contribute to an IRA. If it was as simple as paying the spouse for household chores, then Congress would not have needed to enact the law.

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Re: Roth IRA for children

Post by Spirit Rider » Sat May 23, 2020 1:38 am

rkhusky wrote:
Fri May 22, 2020 10:11 am
If she had a business where she groomed other people’s dogs for money, it might work. But she would have to follow all the rules of a legitimate business and pay employment taxes.

Just because you would pay someone else to do something is not adequate. You might pay someone to cook your food, wash your dishes, vacuum, make your bed, mow your yard, wash your car, etc.

If you can find some instance where the IRS considered parents paying their children to do these things to be taxable compensation and required the children to pay tax on the money, you would have a case.
You need not look any further than Publication 926 Household Employer's Tax Guide, Table 1. Do You Need To Pay Employment Taxes?, A & B.

The IRS clearly envisions paying your "child under the age of 21" as "Household Help". Otherwise, they would not explicitly exempt them from the requirement to A: "Withhold and pay social security and Medicare taxes." and B: "Pay federal unemployment tax."

I make no judgement about the particulars discussed here. However, it is not a question of whether you can hire a child as household help. Rather, what differentiates between household "chores" and household "help"?

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Re: Roth IRA for children

Post by eye.surgeon » Sat May 23, 2020 1:47 am

Both my older children had summer jobs in my medical practice where they did legitimate work, were paid fairly with W2 income, and I made their maximum Roth IRA contributions for them. Many business owners here could do the same, forget about washing dishes.

Something to consider-- every business should have a facebook, instagram and twitter account. Pay your kids to operate them. It's legitimate work often done by well paid adults, and yet kids have an aptitude for it. My daughter attends college but also runs my social media accounts and I pay her through the business with W2 income. She posts things daily. Doesn't get more legitimate than that. She makes more than enough for me to fully fund her Roth IRA yearly.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

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Re: Roth IRA for children

Post by rkhusky » Sat May 23, 2020 7:34 am

Spirit Rider wrote:
Sat May 23, 2020 1:38 am
rkhusky wrote:
Fri May 22, 2020 10:11 am
If she had a business where she groomed other people’s dogs for money, it might work. But she would have to follow all the rules of a legitimate business and pay employment taxes.

Just because you would pay someone else to do something is not adequate. You might pay someone to cook your food, wash your dishes, vacuum, make your bed, mow your yard, wash your car, etc.

If you can find some instance where the IRS considered parents paying their children to do these things to be taxable compensation and required the children to pay tax on the money, you would have a case.
You need not look any further than Publication 926 Household Employer's Tax Guide, Table 1. Do You Need To Pay Employment Taxes?, A & B.

The IRS clearly envisions paying your "child under the age of 21" as "Household Help". Otherwise, they would not explicitly exempt them from the requirement to A: "Withhold and pay social security and Medicare taxes." and B: "Pay federal unemployment tax."

I make no judgement about the particulars discussed here. However, it is not a question of whether you can hire a child as household help. Rather, what differentiates between household "chores" and household "help"?
Just because you pay wages does not mean that it is taxable compensation. Just like not all wages are social security or Medicare wages, as Pub 926 makes clear.

For instance, suppose a husband makes $100K/year and wife is stay-at-home-mom. He pays his wife $20K/year for household chores. Is that $20K taxable compensation? What do they put on their MFJ 1040 for wages - $100K or $120K? Pub 926 treats your spouse and your child under 21 the same.

rkhusky
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Re: Roth IRA for children

Post by rkhusky » Sat May 23, 2020 8:24 am

Here is a post with a tax court reference (T.C. Summary Opinion 2006-127) that seems to indicate that household chores do not count as taxable compensation:
http://tomcopelandblog.com/dont-count-c ... n-children
This case appears to be about a family business(s) that paid a child for household chores and tried to write it off as a business expense.

This appears to be the tax court file, referenced above:
https://www.courtlistener.com/pdf/2006/ ... sioner.pdf

One of the court cases referenced in the above document is Denman v. Commissioner, 48 T.C. 439, 450 (1967), which can be found here:
https://www.leagle.com/decision/196748748aqtc4391445

Another referenced court case is Hamdi v. Commissioner, T.C. Memo. 1993-38 affd. without published opinion 23 F.3d 407
(6th Cir. 1994), which appears to be here:
https://www.leagle.com/decision/1993190 ... m183511863
Last edited by rkhusky on Sat May 23, 2020 8:42 am, edited 4 times in total.

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Re: Roth IRA for children

Post by TomatoTomahto » Sat May 23, 2020 8:26 am

rkhusky wrote:
Sat May 23, 2020 7:34 am
For instance, suppose a husband makes $100K/year and wife is stay-at-home-mom. He pays his wife $20K/year for household chores. Is that $20K taxable compensation? What do they put on their MFJ 1040 for wages - $100K or $120K? Pub 926 treats your spouse and your child under 21 the same.
Genders are reversed (I was SAHD), but wow, maybe I should sue for back wages 😁. Let me see, 19 years at $20k/year; holy smokes, I’m rich!
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Roth IRA for children

Post by rkhusky » Sat May 23, 2020 8:28 am

TomatoTomahto wrote:
Sat May 23, 2020 8:26 am
rkhusky wrote:
Sat May 23, 2020 7:34 am
For instance, suppose a husband makes $100K/year and wife is stay-at-home-mom. He pays his wife $20K/year for household chores. Is that $20K taxable compensation? What do they put on their MFJ 1040 for wages - $100K or $120K? Pub 926 treats your spouse and your child under 21 the same.
Genders are reversed (I was SAHD), but wow, maybe I should sue for back wages 😁. Let me see, 19 years at $20k/year; holy smokes, I’m rich!
Except if you added an extra $20K/yr to your 1040, without actually increasing family income, you would probably be poorer.

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Re: Roth IRA for children

Post by Spirit Rider » Sat May 23, 2020 10:15 am

rkhusky wrote:
Sat May 23, 2020 7:34 am
Just because you pay wages does not mean that it is taxable compensation. Just like not all wages are social security or Medicare wages, as Pub 926 makes clear.
  • Household Help must be paid taxable compensation.
  • Your child can be Household Help.
  • Therefore, a child employed as household help will be paid taxable compensation
For instance, suppose a husband makes $100K/year and wife is stay-at-home-mom. He pays his wife $20K/year for household chores. Is that $20K taxable compensation? What do they put on their MFJ 1040 for wages - $100K or $120K? Pub 926 treats your spouse and your child under 21 the same.
A Red Herring logical fallacy to go along with your "former tax lawyer" Appeal to Authority logical fallacy.

Nobody said anything about paying their spouse as Household Help. As you pointed that would be unwise to increase your MFJ taxable income. Whereas, a child < age 21 will not be subject to any income taxes, FICA or FUTA.

None of this has anything to do with whether there are circumstances where you can pay a child as household help. You have made nothing but specious arguments for total prohibition.

lmbebo
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Re: Roth IRA for children

Post by lmbebo » Sat May 23, 2020 11:05 am

Was wondering about this yesterday. Wife starting her own business. Could we pay the kids to use there photos on the website?

Its probably nothing significant, but maybe something to start a Roth IRA for each? $1000 each one time for there likeness?

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Re: Roth IRA for children

Post by EnjoyIt » Sat May 23, 2020 11:16 am

lmbebo wrote:
Sat May 23, 2020 11:05 am
Was wondering about this yesterday. Wife starting her own business. Could we pay the kids to use there photos on the website?

Its probably nothing significant, but maybe something to start a Roth IRA for each? $1000 each one time for there likeness?
Many bloggers do exactly what you describe.

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Re: Roth IRA for children

Post by TomatoTomahto » Sat May 23, 2020 11:30 am

rkhusky wrote:
Sat May 23, 2020 8:28 am
TomatoTomahto wrote:
Sat May 23, 2020 8:26 am
rkhusky wrote:
Sat May 23, 2020 7:34 am
For instance, suppose a husband makes $100K/year and wife is stay-at-home-mom. He pays his wife $20K/year for household chores. Is that $20K taxable compensation? What do they put on their MFJ 1040 for wages - $100K or $120K? Pub 926 treats your spouse and your child under 21 the same.
Genders are reversed (I was SAHD), but wow, maybe I should sue for back wages 😁. Let me see, 19 years at $20k/year; holy smokes, I’m rich!
Except if you added an extra $20K/yr to your 1040, without actually increasing family income, you would probably be poorer.
Hence the 😁
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Roth IRA for children

Post by TomatoTomahto » Sat May 23, 2020 11:34 am

lmbebo wrote:
Sat May 23, 2020 11:05 am
Was wondering about this yesterday. Wife starting her own business. Could we pay the kids to use there photos on the website?

Its probably nothing significant, but maybe something to start a Roth IRA for each? $1000 each one time for there likeness?
I know this will sound odd, but maybe I’d do it if the kids are too young to remember, but not otherwise. Kids model their parents’ behavior; they tend to do as we do, not as we say.

If it’s legit and you could explain it to them that way with a straight face, go for it. Otherwise, it might turn out to be penny wise pound foolish.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Roth IRA for children

Post by sp226 » Sat May 23, 2020 11:42 am

I put my children on my payroll when they were 12 and 10, and very sorry I didn't do it sooner.
I've used them as models in my marketing materials which made the bulk of their earned income. If IRS ever came calling, I could easily justify it as there were professional photoshoots, and their images were all over my printed and digital marketing. That alone can be $1-2K/yr, plus annual royalties.
Invested in SP500 index fund, over the years their accounts have gone up to about $60-70K.

Now they are 20 and almost 17, and just found out about existence of these IRAs (because I told them). I have not changed the title on the accounts yet, they are still classified as Minor Roths. I suppose my 20 year old can withdraw it if she wanted to... but she wants to be the one paying her college bills, that is fine by me :D

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Re: Roth IRA for children

Post by Spirit Rider » Sat May 23, 2020 12:14 pm

There are only two states where the age of UTMA termination is always age 18. It is very likely that the age of termination is age 21.

There is no UTMA police. The UTMA account owner is the only interested party. Unless they strenuously object, it is not unreasonable to wait until they graduate college and/or are no longer subject to the Kiddie Tax to release custodial control.

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Re: Roth IRA for children

Post by EnjoyIt » Sat May 23, 2020 1:07 pm

At what age can one hire your child to help out around the home office? Office duties would include cleaning up and filling paperwork.

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Re: Roth IRA for children

Post by novillero » Sat May 23, 2020 1:25 pm

I opened a ROTH for my child, but only after she made money from a “real” employer. (I match her pay) I do not think it worth it to worry if I messed up on something that is just not that important. Wait for a bone fide employment. Meanwhile if you want to give your child money, put into a taxable account. Sleeping well is always the best option.

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Re: Roth IRA for children

Post by Spirit Rider » Sat May 23, 2020 6:26 pm

EnjoyIt wrote:
Sat May 23, 2020 1:07 pm
At what age can one hire your child to help out around the home office? Office duties would include cleaning up and filling paperwork.
Is this a home office as a W-2 employee or for a business you own. If it is the former the age is a moot point, because there is no avenue to employ them. If it is the latter, to my knowledge the IRS hasn't weighed in on this in decades when they said hiring an eight (8) year old in a family restaurant business for age appropriate tasks was legitimate.

Even though people have gone lower, personally I think 8 - 10 is probably reasonable. Remember, you are signing a tax return saying that this employment is for business necessary and productive tasks. Not employing them so you can provide babysitting services.

EnjoyIt
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Re: Roth IRA for children

Post by EnjoyIt » Sat May 23, 2020 6:38 pm

Spirit Rider wrote:
Sat May 23, 2020 6:26 pm
EnjoyIt wrote:
Sat May 23, 2020 1:07 pm
At what age can one hire your child to help out around the home office? Office duties would include cleaning up and filling paperwork.
Is this a home office as a W-2 employee or for a business you own. If it is the former the age is a moot point, because there is no avenue to employ them. If it is the latter, to my knowledge the IRS hasn't weighed in on this in decades when they said hiring an eight (8) year old in a family restaurant business for age appropriate tasks was legitimate.

Even though people have gone lower, personally I think 8 - 10 is probably reasonable. Remember, you are signing a tax return saying that this employment is for business necessary and productive tasks. Not employing them so you can provide babysitting services.
I was talking about a home office business that is taxed as an S-Corp.

Duties would include waste management, making sure printer and computers are functioning and stocked, as well as some other minor office related duties. I figure paying $15/hr at 2-3 hours a week is reasonable compensation for such work.

Thanks for your response Spirit Rider.

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Re: Roth IRA for children

Post by rkhusky » Sat May 23, 2020 9:05 pm

Spirit Rider wrote:
Sat May 23, 2020 10:15 am
[*]Household Help must be paid taxable compensation.
Do you have a reference for that assertion?
Spirit Rider wrote:
Sat May 23, 2020 10:15 am
[*]Your child can be Household Help.
[*]Therefore, a child employed as household help will be paid taxable compensation
As I stated previously, if the child has a legitimate business with other customers, then the parents could be a client of their child and the wages would be taxable compensation.*
Spirit Rider wrote:
Sat May 23, 2020 10:15 am
A Red Herring logical fallacy to go along with your "former tax lawyer" Appeal to Authority logical fallacy.
A bigger fallacy would be to trust an anonymous Internet poster over a well-respected tax expert.
Spirit Rider wrote:
Sat May 23, 2020 10:15 am
None of this has anything to do with whether there are circumstances where you can pay a child as household help. You have made nothing but specious arguments for total prohibition.
The specious red herring is to switch the subject from the question of whether paying a child for household chores counts as taxable compensation, to the question of whether a child can provide legitimate Household Help. The answer to the former is no. The answer to the latter is yes.

To quote the tax court in T.C. Summary Opinion 2006-127:
Even if we accept the accuracy of the documents, many
of the tasks that Steven performed are in the nature of routine
family chores such as cleaning, vacuuming, taking out garbage,
and accompanying Mrs. Alexander on shopping trips. Such chores
are “part of parental training and discipline rather than the
services rendered by an employee for an employer.” Denman v.
Commissioner, supra at 450.
It is the responsibility of the parents to show that the wages paid to the child count as taxable compensation before contributing to a Roth IRA for the child. I have so far not seen any evidence that that would be true for household chores, absent a business.

*edit: If self-employment income is more than $400, SE taxes need to be paid. See: https://www.irs.gov/pub/irs-utl/OC-What ... dtaxes.pdf
https://www.irs.gov/pub/irs-pdf/i1040sse.pdf

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Re: Roth IRA for children

Post by lmbebo » Sun May 24, 2020 8:53 am

TomatoTomahto wrote:
Sat May 23, 2020 11:34 am
lmbebo wrote:
Sat May 23, 2020 11:05 am
Was wondering about this yesterday. Wife starting her own business. Could we pay the kids to use there photos on the website?

Its probably nothing significant, but maybe something to start a Roth IRA for each? $1000 each one time for there likeness?
I know this will sound odd, but maybe I’d do it if the kids are too young to remember, but not otherwise. Kids model their parents’ behavior; they tend to do as we do, not as we say.

If it’s legit and you could explain it to them that way with a straight face, go for it. Otherwise, it might turn out to be penny wise pound foolish.

They are still young, i.e. potty training.

rkhusky
Posts: 9240
Joined: Thu Aug 18, 2011 8:09 pm

Re: Roth IRA for children

Post by rkhusky » Sun May 24, 2020 1:20 pm

lmbebo wrote:
Sat May 23, 2020 11:05 am
Was wondering about this yesterday. Wife starting her own business. Could we pay the kids to use there photos on the website?

Its probably nothing significant, but maybe something to start a Roth IRA for each? $1000 each one time for there likeness?
I would check the going rate for such photos, rather than just picking a number out of the air.

StealthRabbit
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Joined: Sat Jun 13, 2009 1:25 am

Re: Roth IRA for children

Post by StealthRabbit » Sun May 24, 2020 2:15 pm

Good idea to start kids in Roth;
1) IRA is Not considered in FAFSA - college financial aid eval.
2) Teach them to work (good idea), hint: kids work best for others, team up with neighbors and friends, gives kids a good perspective of working for future bosses / different leadership and expectations than parents)
3) Teach them to become Bogleheads (Ours started at age 12, sooner the better) One became a Fin Analyst (CFA), another is a finance manager for a non-profit) (12 yrs beyond college)
4) ours paid 100% for their college (had enough in Roth to cover it, but didn't touch their Roth (as a boglehead would advise)
5) I matched their wages 100% to Roth limits age 12 to 18
6) Teach them to run / manage their own business, They can hire someone to do that for them when they leave for college and still have revenue and a business to come back to (if they wish).
7) Start a family business and share / pass around responsibilities annually so everyone is 'cross-trained' (very helpful for career guidance and actual working experience.

Consider... RETIRING ( :shock: ) while your kids are home and of formative (business acumen) age. You can always go back to a 'j-o-b' later, if you must.

Many options... spend your very brief time with your kids doing what is best for your family. (situations vary).

We were able to be with kids and still retire pre age 50 as a single earner factory night shift laborer. (never over $65k total gross income). We also gave all our assets away (DAF) at age 39, and still eeked out an early retirement. (from wage income). Went back to college at age 50 (for free).

Kids did college for free, thanks to our state's program since 1991, of FREE FT college instead of (or in addition too) HS,
https://en.wikipedia.org/wiki/Running_Start
Saved them a boatload of money, which they knew how to invest!

lws
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Re: Roth IRA for children

Post by lws » Mon May 25, 2020 12:51 pm

Please review all applicable laws before attempting this move.

Gui0507
Posts: 16
Joined: Wed May 13, 2020 4:46 pm

Re: Roth IRA for children

Post by Gui0507 » Mon May 25, 2020 8:11 pm

rkhusky wrote:
Thu May 21, 2020 9:11 pm
Payment for household chores does not qualify for Roth IRA contributions for your child. Nor do you have to pay income tax, SS, UI, L&I, etc.

The child does chores because he is a member of the family. Any compensation is a gift.
I have a UTMA/UGMA for my children, I figured this was the best method to save some money for them? In FL they can’t touch it till their 25 which I like.

rkhusky
Posts: 9240
Joined: Thu Aug 18, 2011 8:09 pm

Re: Roth IRA for children

Post by rkhusky » Mon May 25, 2020 8:32 pm

Gui0507 wrote:
Mon May 25, 2020 8:11 pm
rkhusky wrote:
Thu May 21, 2020 9:11 pm
Payment for household chores does not qualify for Roth IRA contributions for your child. Nor do you have to pay income tax, SS, UI, L&I, etc.

The child does chores because he is a member of the family. Any compensation is a gift.
I have a UTMA/UGMA for my children, I figured this was the best method to save some money for them? In FL they can’t touch it till their 25 which I like.
If you/they want to buy stocks/mutual funds and want the account titled in their name, then that is the way to go. If you just want a savings/checking account, there are other options. If you/they don't care whether the account is titled in their name, there are other options.

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