Paying children

[Ekanive23]

When can I realistically start paying my kids for “help” on rental properties and it pass the sniff test for Roth contributions.

I know they might not be worth the max Roth contribution, I am not here asking about that.

when can I feasibly pay them for sweeping, cleaning, painting.

I plan on keeping them on payroll throughout college as well. By then it’s obvious.

I was thinking junior high?

[CordMcNally]

Probably when somebody else would really hire them for the 'help' they're providing. If you have to ask then probably not there yet.

[auggie1983]

Do you want to have a kid friendly rental? Maybe pay them to stay 24 hours, see what needs to be child-proofed, etc. Friends and family could gift match them to bring them up to Roth limits?

[Ekanive23]

Probably when somebody else would really hire them for the 'help' they're providing. If you have to ask then probably not there yet.

I’m totally aware that I want to pay them too early. I don’t care that much. Just don’t want it to be brought up. I personally wouldn’t hire anyone less than 18 but I was thinking 12 was reasonable

[jacoavlu]

same q comes up all the time. this isn’t really the place where people give you advice on how to break the rules. the standard line is you can pay a reasonable amount for real work that is appropriate for their age. beyond that, that’s between you and your tax preparer

[CordMcNally]

I’m totally aware that I want to pay them too early. I don’t care that much. Just don’t want it to be brought up. I personally wouldn’t hire anyone less than 18 but I was thinking 12 was reasonable

I doubt there are many people hiring 12 year olds to do work on rentals but it's ultimately your decision and you're the one that has to justify it.

[MPMD]

I’m totally aware that I want to pay them too early. I don’t care that much. Just don’t want it to be brought up. I personally wouldn’t hire anyone less than 18 but I was thinking 12 was reasonable

seems like a really good cognitive test for danger here is "am i paying them primarily to create Roth contributions for them?"
if the answer is yes then i would pause for thought.
that said, my guess is that this isn't exactly the biggest problem the IRS has to handle.

[SLC OB]

I doubt there are many people hiring 12 year olds to do work on rentals but it's ultimately your decision and you're the one that has to justify it.

My 12 year old did a ton of yard work for the neighbors and they paid him $15/hour and an additional tip of $5/hour since he was always on time, hard working, reliable, etc. BANK!

[CordMcNally]

My 12 year old did a ton of yard work for the neighbors and they paid him $15/hour and an additional tip of $5/hour since he was always on time, hard working, reliable, etc. BANK!

Yard work is a common job for a lot of kids. Sprucing up rental houses, especially for your parents, not so much. It doesn’t pass the smell test or the OP wouldn’t have even questioned it.

[Tim]

Yard work is a common job for a lot of kids. Sprucing up rental houses, especially for your parents, not so much. It doesn’t pass the smell test or the OP wouldn’t have even questioned it.

Excellent example. If the kid does yard work for others, you can definitely pay them. Same with property maintenance tasks. Earned income, not gifts or tax benefits. Actually, this is between you and the IRS. Neither the kid nor accountant are responsible.

[Random1]

You might get in trouble with child labor laws forcing a 12 year old to work. All minors in my state of PA , have to apply for a work permit through the local school district.


Q: If a family wants to employ their child in their business, are they exempt from the Child Labor Act?
A: No. There is such an exemption under federal law for family business that does not involve manufacturing, but there is no similar exemption under state law.

[Lordosis]

Yard work is a common job for a lot of kids. Sprucing up rental houses, especially for your parents, not so much. It doesn’t pass the smell test or the OP wouldn’t have even questioned it.

a 12 year old can mow a lawn but not vacuum a floor as a job?

[auggie1983]

can't children be gifted money to fund a Roth? the equivalent of what they have earned/contributed? So maybe your child only earns $500 and contributes that to a Roth, but then couldn't 11 friends/family/parents gift $500 each?

What's to prevent a parent gifting their parents $500 each and then having the child's grandparents regift that to the grandchild?

[CordMcNally]

a 12 year old can mow a lawn but not vacuum a floor as a job?

It gets blurry but kids getting hired out for lawn work isn't uncommon but I don't see too many kids getting hired to be a handyman. If the kid is vacuuming other people's floors besides their parent's floor then it's likely kosher but I doubt they are. In the end, it isn't up to me but I personally would have a hard time justifying the OP's situation.

[jacoavlu]

can't children be gifted money to fund a Roth? the equivalent of what they have earned/contributed? So maybe your child only earns $500 and contributes that to a Roth, but then couldn't 11 friends/family/parents gift $500 each?

What's to prevent a parent gifting their parents $500 each and then having the child's grandparents regift that to the grandchild?

IRA contributions require earned income

where the funds come from for the actual contribution is different