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|Subject: Re: IRAs for under 18||Date: 6/4/1998 8:12 AM|
|Author: TMFPixy||Number: 3570 of 81642|
<<OK, makes sense that money from parents for chores would not count. What about babysitting, mowing lawns, painting, etc. for *other* people? Would this count? What if my 7 year old makes a killing selling lemonade on the sidewalk? IOW, how critical is the official W-2 form in all this? My impression is that most teens don't file returns on income such as this, but would typical "informal summer job" income qualify one to open an IRA if a tax return was filed?>>
Do you really, truly wish to open that can of worms? Lordy, Money did the public a great disservice when it published that ill-conceived article. Think about the issues involved.
The rules are crystal clear: You must have received TAXABLE COMPENSATION from wages, salaries, tips, professional fees, bonuses, amounts received for personal services, commissions, alimony/separation allowance, or income from self-employment. That compensation must be reported on a 1040. Additionally, if it is indeed earnings income, FICA must be paid, and perhaps worker's compensation program contributions to the State. Who will pay those items? If the child is "self-employed," the child will, so at least 15% goes to Uncle for FICA - And it better be paid on time, too, or there will be penalties to pay. Is there an Employer Identification Number? Why not? And the list goes on.
I agree that the "earnings" you cite might qualify. But even if you could prove they did, you'll run afoul of other areas in employment law that can cause some big, big problems.
Bottom line: If the income ain't on a W-2, IT AIN'T WORTH THE HASSLE!!!!!!!!!! Fergidaboudit. Get the kid a REAL job and then establish the IRA.
Just this Fool's opinion FWIW.
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