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I took the plunge and opened a custodial Roth IRA at Schwab for my 14 year old this week. My daughter actually does have earned income (baby sitting, tutoring and cleaning house)though it's not well documented. My accountant feels there will be no IRS problem with this situation. Have any Fools out there actually opened IRA's for their kids and did you have any unexpected problems, IRS or otherwise?

I've not had the experience, but I'll offer a couple of suggestions. Have your daughter file a return showing the income, even if she owes no tax and technically has no filing requirement. That way the IRS computers won't get curious because they see an IRA contribution with no earned income to match it up with.

My second suggestion has to do with a little lesson teaching. Stress to your daughter the importance of keeping good financial records, and follow up to make sure she does it. This is a habit that will serve her well in life, even if straightening up her room doesn't.

Phil Marti
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