In order to have an IRA, you have to have income reported on W-2. Babysitting money won't do it. The only mutual fund I know of that does IRA's for children is American funds. You must see a broker to get them.You do need earned income. I think the IRS would tax the babysitting money if it new about it (and it will now know). Could have a self employment tax problem since the earnings are over 400. I think this si form SE and filed with the 1040. Also mayhave some tax implications with parents returns. What a complicated tax system we have.My wife had a serious operation and I paid one of my daughters under $1,000 (Under 1,000 avoids the need to file W2 and pay social security taxes) and then contributed the earnings to an IRA with no problem. I did explain on my tax return why there was no W2 attached. I would go with the IRA. I think it is worth it in the long run.
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