Can we contribute the $1500 even tho she didn't make that much?According to this article, the IRS is vague (what's new) on how child income from parents for household chores should be handled. IF you paid your child earned $300 during the year for household chores from you, that income could be considered for earned income & IRA purposes. Are you sure that you didn't pay your child at least $6 / wk for all that lawn mowing, baby sitting, car washing, etc that they did?...http://www.fairmark.com/rothira/minors.htmRoth IRAs for Minors...The major impediment to IRAs for children, especially young children, is the earned income requirement. An unmarried person must have earned income of his or her own to contribute to a Roth IRA. The income has to be compensation income, not investment income. And it has to be taxable compensation income....Why not use a child's earnings from household chores to meet the earned income requirement? Let's make some favorable assumptions:· The child is actually doing work for the money.· You're paying only a reasonable hourly rate for the work.· You have good records to prove that the work was done and the money paid.Will that do the trick? Strangely enough, there's no clear guidance on this issue. I personally don't believe this form of income can support a contribution to an IRA, because I don't think this income is taxable. So far, though, the IRS hasn't said anything about it, and it isn't clear at this point whether they will raise the issue.It's rather bold on my part to suggest that this form of income isn't taxable, because the Internal Revenue Code says all income is taxable unless an exception is made, and there's no exception for amounts paid by parents to minor children for household chores. No explicit exception, anyway. Yet I'm comfortable in the conclusion.
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