No. of Recommendations: 0
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.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.