Teenager ROTH IRA
Is a W-2 required for verification of earnings for a teenager to establish a ROTH IRA or does the filing of a tax return reporting earnings from jobs such as babysitting, mowing lawns etc. suffice? Of course, the teenager would need to pay income tax on reported earnings as the parents would continue to claim the teenager as a dependent on their return.
Permalink Submitted by Alan - IRA critic on Wed, 2016-01-06 04:53
If the chores are for the parent, it is not taxable compensation, although the IRS has let many of these contributions skate through. If the employer is someone else, the contribution is more valid since such income is taxable, but much better if a W-2 is issued. Tax does not necessarily have to be paid if the compensation is under the filing requirement.
Permalink Submitted by Richard Rea on Mon, 2016-01-18 23:14
I had my teenage girls working and getting W-2s as much as possible up to the annual Roth IRA contribution limit. I think back then it was $3,500. I would let them keep the earn income and just “gift” them the Roth IRA contributions. They are in their early 30s now and have Roth IRA bigger than most 60 year old Americans, which apparently isn’t say that much. lol