Get around Income rule for child ROTH IRAs

No sir, interest is passive. Seems tough to pull off a job for a kid under 5. Maybe chores or something? But getting a significant amount in seems like some work. Good effort though.

Not meant to hijack but If they are 9yrs old and you have an LLC, can you put them on payroll?

I have been researching and it looks like income from babysitting and yard work is considered income. The is not helpful for young children but for teenagers may be a work around. You could pay your teenager to wash your car and contribute to ROTH. May not be able to max out but it is a start.

I looked into this last year. They have to have external income from the home to qualify. So you can’t qualify by paying your child to babysit if they don’t also have a babysitting gig outside of your home.

ETA: also I think once they go over $800 they have to start paying self employment taxes… something like that. Just gets screwy trying to put your kid in a Roth early.

My research is actually for my grandkids for when they turn 21. I want to start them learning to invest and start their retirement fund. I have 3 in college and 2 in school. I have an LLC and can pay them under $600.00 a year to help me with maintenance that can go to the ROTH. The OP is in a different place but I thought it might help him later. I have 2 of them already investing but starting a retirement fund was my goal.

Morton Financial Advice

This resource says that you can pay your own child for work in your own house.

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Employing your young child doesn’t mean forcing hard labor. If she can do small tasks all on her own such as picking up sticks from the yard ($.10/stick), unloading the dishwasher ($.05 for every fork), or sorting laundry ($.25 for paired socks), that counts as earned income. The IRS has defined “a household employee” and you can employ your child to do that work. Following IRS guidelines, you can pay per task or establish a wage. This is earned income for your child.

Why did I assign value to the household tasks above? When it comes to how much you can pay your child, a common-sense rule applies: depending on the age of your child, the task they are working on, and what you might pay another worker to do the same job, you determine a fair wage.

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I just started one for my 4 year old and I do legit pay him for helping with small tasks like picking up the magnolia seed pods that constantly litter my front yard.
Having said that, I do tread lightly because outside of acting/modeling, how much income can a 4 year old realistically earn? I don't see making more than a few hundred dollars in contributions per year until he is older. At this point, it's more about teaching the value of work and getting investment started early.

OP if you are looking for other tax-incentivized savings vehicles for your kids, look into an HSA if you have that option. I max ours every year and do not use the money but save ALL medical receipts. You can reimburse yourself at any point in the future while that money has grown in an investment account. The money also remains under your control, unlike a custodial Roth, which will eventually become theirs. May not be a problem but we all know some kids may not be ready for that financial responsibility and could blow the money. It's hard to predict that when your kid is still in preschool

Your kid's broken bone or braces reimbursement could help them with college, downpayment on first home, etc

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“paying” his kid $13k/yr or “$500/2wks” for tax purposes.... had me curious

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for tax purposes

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For the love of God I hope he doesn't use that phrase if he is audited.

I keep records of when I pay them and show it on my deductions for rental property. I am pretty sure it is legal.

It is legal. My comment was about their earned income. No 1099, not claiming on taxes, no “earned income”. The 1099 is the document that declares they earned income for tax purposes. I suppose they could declare income without it, but then they have to prove it, etc.

Try using education accounts for the kids.
Every little bit helps.