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This seems too good to be true -- am I missing something?

According to "Mutal Funds" Magazine (June 1998) and IRS publication, it is theoretically possible to do the following:

a) Pay your young children (say 4 years old) each $2,000 per year as "salary" for work they do around the house

b) Since these "domestic employees" are family members, no social security, medicare, nor employment taxes must be paid -- zero.

c) If they they have no other income, this $2,000 payment to them is tax free (children can "earn" up to $4,150 each year and pay no tax).

d) Since they will have earned income, each child can contribute $2,000 to a Roth IRA and earn money on these contributions tax free.

Talk about giving your children a leg-up -- what better gift can you give. Of course, it seems to good to be true. Is the above legal and doable? What if any condition am I missing?
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