SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Lots of simply inaccurate tax information above.
OP, contact Schwab (or wherever you plan to open the custodial Roth IRA for their requirements). It's been a while, but it's the standard stuff that you would expect and would have on hand: name/address/DOB/SSN of the kid, and of course the opening deposit - a check from the parent brought to the local office is what I did, but you can open the account then mail a check as well.
On tax stuff:
Earned income (by teens or anyone else) is generally taxable income and qualifies for Roth contributions. Even if there is no 1099. Even if there is no W-2. Even if it is not reported on a tax return. (Even if, in fact, the source of the income is illegal.)
1099s are only required to be filed if the employer pays the contractor more than $600 in a year. Less than $600 means no reporting requirement. W-2s are required if the person is an employee and earns even $1 in a year.
I don't recall but there may be an exception to the W-2 and/or 1099 reporting if the employer/employee relationship is also a parent/child relationship.
Tax returns are only required if the person meets the requirements in the Form 1040 instructions. For teenagers, who are usually tax dependents, this means reading Charts B and C. (If a teenager is not a tax dependent, then they would read charts A and C.) If none of the situations apply, a tax return is not required.
It is possible and even somewhat common with teenagers for them to receive W-2 and 1099-INT income but not have a tax return filing requirement. This is because the requirements for these things do not line up with each other. The IRS knows this and is completely nonplussed if they receive a W-2 or 1099-INT for a small amount and do not receive a matching tax return.
A teenager *may* file an income tax return even if they are not required to. But it certainly isn't necessary to "prove" income to the IRS in order to make a Roth contribution - even the IRS link cited above by TheCosmicAvenger agrees with what I've written and not TCAs subsequent comment if you read it carefully.
The only reasons I can think of that a teenager would file an optional tax return is (a) to get W-2 withholding refunded to them if they had no tax liability, (b) to claim any federal tax credit, such as EITC, AOTC, RSCC, etc., or (rarely) (c) to prevent IRS tax fraud on their SSN.
It is wise, as has been mentioned several times, for teenagers to keep a contemporaneous (heh) earnings log. This is not strictly required, but is only necessary in the extraordinarily unlikely event that the IRS comes along and asks the teen to justify their $400 Roth IRA contribution when they were 15 or whatever. If they can't find or do not have an earnings log, it is theoretically possible that the IRS could disallow the contribution and require the teen to (probably) withdraw the contribution plus applicable earnings and then pay taxes (and maybe a 10% penalty) on the earnings.
I've never heard of any IRS audits of teenage Roth IRA contributions, and as a practical matter, they never would - the amounts of additional tax revenue are likely to be small enough to not be worth it. However, I do encourage everyone to comply with all applicable tax laws.
OP, contact Schwab (or wherever you plan to open the custodial Roth IRA for their requirements). It's been a while, but it's the standard stuff that you would expect and would have on hand: name/address/DOB/SSN of the kid, and of course the opening deposit - a check from the parent brought to the local office is what I did, but you can open the account then mail a check as well.
On tax stuff:
Earned income (by teens or anyone else) is generally taxable income and qualifies for Roth contributions. Even if there is no 1099. Even if there is no W-2. Even if it is not reported on a tax return. (Even if, in fact, the source of the income is illegal.)
1099s are only required to be filed if the employer pays the contractor more than $600 in a year. Less than $600 means no reporting requirement. W-2s are required if the person is an employee and earns even $1 in a year.
I don't recall but there may be an exception to the W-2 and/or 1099 reporting if the employer/employee relationship is also a parent/child relationship.
Tax returns are only required if the person meets the requirements in the Form 1040 instructions. For teenagers, who are usually tax dependents, this means reading Charts B and C. (If a teenager is not a tax dependent, then they would read charts A and C.) If none of the situations apply, a tax return is not required.
It is possible and even somewhat common with teenagers for them to receive W-2 and 1099-INT income but not have a tax return filing requirement. This is because the requirements for these things do not line up with each other. The IRS knows this and is completely nonplussed if they receive a W-2 or 1099-INT for a small amount and do not receive a matching tax return.
A teenager *may* file an income tax return even if they are not required to. But it certainly isn't necessary to "prove" income to the IRS in order to make a Roth contribution - even the IRS link cited above by TheCosmicAvenger agrees with what I've written and not TCAs subsequent comment if you read it carefully.
The only reasons I can think of that a teenager would file an optional tax return is (a) to get W-2 withholding refunded to them if they had no tax liability, (b) to claim any federal tax credit, such as EITC, AOTC, RSCC, etc., or (rarely) (c) to prevent IRS tax fraud on their SSN.
It is wise, as has been mentioned several times, for teenagers to keep a contemporaneous (heh) earnings log. This is not strictly required, but is only necessary in the extraordinarily unlikely event that the IRS comes along and asks the teen to justify their $400 Roth IRA contribution when they were 15 or whatever. If they can't find or do not have an earnings log, it is theoretically possible that the IRS could disallow the contribution and require the teen to (probably) withdraw the contribution plus applicable earnings and then pay taxes (and maybe a 10% penalty) on the earnings.
I've never heard of any IRS audits of teenage Roth IRA contributions, and as a practical matter, they never would - the amounts of additional tax revenue are likely to be small enough to not be worth it. However, I do encourage everyone to comply with all applicable tax laws.
