Paying children

[SLC OB]

good for him
i would have a genuine concern about FMV if i were trying to do roths

I never did Roth's on this $$. The point was that people will pay a 12 year old a good wage. He turned 14 and could get a work permit this past May (Is that just California?). Started working 3 days after his birthday at a local (very expensive) club washing dishes (he loves to cook and wanted experience in a kitchen). We took one week off to run the Rubicon trail (4x4 trail), one week off to go whitewater rafting, and 2.5 weeks off to visit the Galapagos. He still made $5200 for the summer with all those vacations! They were paying him $16 plus tips, which turned out to be $22/hour!!! fortunate for him, unfortunate for Momma, I did a Momma-match for him into his Roth for this W2 income.

[Ekanive23]

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.

I have seen enough on here. Vacuuming, wiping walls, doing the landscaping, changing filters, heck even yard work on some of them I think I’ll be able to validate. I was painting fences at 12 maybe I can get them painting walls.

my only problem is I have 4 kids. That’s a lot of rentals!

[Tim]

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

I got paid for doing a lot of jobs by someone other than my parents.

I guess my folks were cheap and lazy. Or smart. My older brothers got paid more allowance too!

[spiritrider]

^^^ A very correct succinct reply to the subject.

[Kamban]

Three things to keep in mind when employing children and paying them with the main purpose of funding their Roth IRA.

1. Is the payment appropriate for the level of work ( not giving $100K to use their photos as model for your website).

2. Is the job appropriate for their age and as to not get into issues with child labor laws and that they can safely do that job.

3. Will someone else be ready to employ them and pay that amount you want to pay, if the need is there. If not, this is really a gift or a chore but not paying work.

Always keep detailed records to prove that the minor really did the job you state he did and prove it to IRS. Otherwise you might get into trouble in the rare event they audit you.

[Random1]

There is a big difference between paying a 12 y.o kid to do some yardwork, get some cash and learn a work ethic and paying your kid a pretend job to fill up a roth IRA

[MPMD]

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!

good for him
i would have a genuine concern about FMV if i were trying to do roths

[wideopenspaces]

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!

Man, we have very different 12 yo boys . . . Mine is just barely past the stage of accidentally DAILY putting on his shirts *and sometimes pants* inside out AND backwards because he just can't pay attention to anything.

CAN WE TRADE? ;-)

OP no 12 is not old enough. Maybe 15? If they are a responsible/mature 15 yo.

[spiritrider]

As indicated by Random1, there are state labor laws and the Fair Labor Standards Act (FLSA). The IRS compliance view, is not the only concern.

State labor laws

• minimum age; during school hours, outside school hours, usually in the range of 12-14, but can be lower/higher or even none
• maximum hours (usually); 3/school day, 8 non-school day, 23/week
• with and without exemptions for children of business owners

FSLA

• minimum age 14
• maximum hours; 3/school day, 8 non-school day, 18/week
• exempt for children of business owners
• does not apply to employees of businesses < $500K in revenue and not engaged in interstate commerce, which can be as simple as communications across state lines

Both the OP and SLC OB's 12 year old's employer are most likely exempt from the FSLA. The OP may or not be exempt from their state's labor laws. If the latter for the OP and always for SLC OB's 12 year old, they are subject to their state's minimum age.

[childay]

I read it wrong I was thinking it was a short term rental needing cleaning between guests. That would be a great job for a kid! Not advising that it would be worth the risk of roth contributions. Just wait a couple of years until they get a real job. I worked since I was 14. I wish I knew about roth IRAs back then!

Yeah not sure exactly when I started working for my parents but they certainly didn't know about roths (probably still don't).

[Lordosis]

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.

I read it wrong I was thinking it was a short term rental needing cleaning between guests. That would be a great job for a kid! Not advising that it would be worth the risk of roth contributions. Just wait a couple of years until they get a real job. I worked since I was 14. I wish I knew about roth IRAs back then!

[Anne]

Thanks... $500 child + $500 gift? or $500 only from child?

$500 only. There is no gift matching rule for Roth accounts. When people say they gift match their child what they mean is they put everything their child earned into the Roth, and then give their child an equal amount to spend so that the child doesn’t complain about their parents teaching them the very helpful lesson of the benefits of early investing, as the not fully developed frontal lobe does not fully grasp that the early start to the Roth account is a much better gift than is the money they were gifted to spend on whatever.

[auggie1983]

Thanks... $500 child + $500 gift? or $500 only from child?

[Anne]

If a child has $500 earned income for the year, how much can be gifted to them for a contribution to a custodial Roth? By how many people? Can each parent gift?

If you have $500 earned income for the year, only $500 can go in your Roth. Others can gift you as much as they want (taking into account gift tax laws and regulations), but only $500 total can go into the Roth.

[jacoavlu]

reasonable amount for real work, age appropriate. it doesn't have to be more complex than that.

household chores (your own household) don't count even if satisfying the above