Roth IRA for minors

[semtex]

I just realized that minors could have their own roth ira accounts as long as they earn the money themselves.



My son is 15 now. He was mowing and shoveling last a few years. I started to pay him 20 since last year at his request. Much cheaper than outside help, . In my understanding, this kind of work is counted as his earning.


Dose any one have the experience to have ira for their kids? how do you document the kids earning for IRS?

 

[sengsational]

Recently discussed Funding a child's Roth IRA when they work.


Here's an article too:



https://www.marottaonmoney.com/fund-your-childs-roth-with-chore-income/

 

[davebarnes]

After 22 years as self employed, I have never had the IRS ask for proof of income.
I declare my 1099 earnings and pay taxes (income, SS, Medicare). They seem to be happy with that.

 

[semtex]

Recently discussed Funding a child's Roth IRA when they work.


Here's an article too:



https://www.marottaonmoney.com/fund-your-childs-roth-with-chore-income/

you guys are experts

 

[RE2Boys]

Sure, have my son's have had Roth IRA accounts since they were 16 years old. And I match any monies that they decide to contribute to their Roths. Show earned income by filing an income tax return following all the rules. Depending on your state, their may be some gotcha's. Like in PA, the threshold for filing a state income tax return is $34.

Only problem we ran into is being able to open a brokerage account for my sons due to minimum investment size, but we worked that out. The next issue was getting my name off the account once he turned 18, the customer reps were of little help. Finally just opened a new account and transferred IRA monies to the new account.

 

[samcat]

He will have to pay social security and Medicare on the earnings. Probably won't owe any taxes though. I also believe the total amount contributed cannot be more than his income.

 

[sengsational]

Those taxes are due if earnings exceed $400 as a contractor. If he works in a family business, those taxes are not applicable.

 

[samcat]

I was hoping he would be making over $400 since she was going to match it. I'm not sure about the family business.

 

[copyright1997reloaded]

He will have to pay social security and Medicare on the earnings. Probably won't owe any taxes though. I also believe the total amount contributed cannot be more than his income.

It might not be bad to have paid SS and Medicare if he intends to retire very early assuming he can earn enough to qualify for a Quarter of Coverage (currently $1360 in earnings in a given quarter).

I wonder if anyone has done a spreadsheet which calculates the break-even period from tax-free Roth growth assuming the initial investment was reduced by SS & Medicare tax & Income Tax vs income obtained outside of the system, i.e. not invested in a Roth but where there was no taxes paid (i.e. under the table or as a gift).

 

[samcat]

I agree. Our 20 something kids have put money in their Roth for years but it was always W-2 income.