Roth IRA for Children

Is there a legal age for kids working? I started when I was in high school and don’t have kids so I’m not sure.

Fair Labor Standards Act sets the limit at age 14. They can perform some work in some occupations, but not manufacturing, mining or the 17 hazardous occupations. They can do babysitting work and homeworker type work.

There are a handful of rules behind this that I have picked up and seem to believe without being able to actually reference where they come from or their validity.
1) you cannot pay your kids to do their chores in this manner. It seems as if they cut grass for your neighbor it's fine, but for you it's not. Allowance isn't earned income.
2) if you own a business and employ them, they have to have a real job at a competitive rate, not $6000 to shred paper for an hour.
3) there's actually a law where if it's truly a mom & pop shop (parents are the only owners of the business that's paying them, if you're payiny them from a business x though it sounds like you aren't) and the earned amount is down in that range, there are no payroll taxes due on the money.



White Coat Investor has a handful of blog posts on it. He pays his kids down to birth as "models" for the site and pays one of his kids to write a blog post a few times a year. He comments that it is difficult to come up with $6000 of work until they're up in the 10-12ish range. He seems to have a particularly conservative view on the subject. this is probably a good thing to talk to your accountant about, because it's a legitimate - if done right - tool to skirt generational inheritance taxes. If you're passing down less than $11MM per spouse per kid, they're less likely to be interested in you. It's possible they'd miss what capital gains tax you would've owed on it when passing it down, but the way that I understand the step-up in basis upon death rule to work (you and wife die and hand $200,000 to kids that has grown from $50,000 that you invested 20 years ago, when you die, your kids basis jumps as if they bought all the stock on the day of your death, so they owe no taxes if they cash in (and I think they get a 30-day window actually) and if they were to hold onto it for another 20 years, when they sell it, they owe gains on anything over $200,000 rather than $50,000), it shouldn't really matter, so I'd imagine you're less likely to be a target.