My 10-yr sold artwork in 2024 & made $800 I opened a minor Roth & deposited that money (1) Do I need file separate tax for kid? (2) if yes, how to report that $ in tax?

[dimmi0205]

(3) Can I still claim the 10 yr old for child tax credit even if kid need to file separate tax?

[DoninGA]

No you do not need to file a tax return for the child if that was their only income for the year.

Yes, you can still claim the child as your dependent.

[dimmi0205]

since its deposited in Minor roth (which is an after tax account) and the earned income was in cash and no tax was paid upfront but all earnings were as is deposited in minor roth - so would there be no tax liability? 

[DoninGA]

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@dimmi0205 wrote:

since its deposited in Minor roth (which is an after tax account) and the earned income was in cash and no tax was paid upfront but all earnings were as is deposited in minor roth - so would there be no tax liability? 

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Correct he has no tax liability.

He would only have to file a tax return if he had unearned income of $1,300 or more

Or earned income of more than $14,600

[DoninGA]

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@dimmi0205 wrote:

since its deposited in Minor roth (which is an after tax account) and the earned income was in cash and no tax was paid upfront but all earnings were as is deposited in minor roth - so would there be no tax liability? 

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Re-thinking this -

The income earned for the sale of the artwork could be construed as self-employment income and since the income was $400 or more he would have to file a tax return and report the income and any expenses on a Schedule C.

You can decide to file a tax return for him for the self-employment income and if you do make sure that you indicate on the return that he can be claimed as a dependent.

Also, If you're filing a return for a minor child who cannot sign the return, sign the child's name followed by the word "by," then your signature, and your relationship, such as "parent" or "guardian for minor child."

[dimmi0205]

1) so if the Return of excess IRA is done to the extent of $425-  (to keep the Roth less than $400) ? 

(2) No tax need to be filed for minor after excess return (since the contribution can be made only to the level of earned income 800 less 425 = $375 in this case) 

(3) still contribute to extent of $375 to minor Roth?

(40 Does minor income less than $400 need to be reported on parent's taxes?

[AmyC]

As I was reading, I thought self-employed income but then when I read DoninGA give that as an answer, I thought hobby income. So this is actually where we need to start. The IRS offer 9 factors to determine  Earning side income: Is it a hobby or a business?

I don't believe the sale of one painting constitutes a business. I would call it sporadic income and not intended to provide expenses.

1. That said, the income would qualify for the ROTH, full amount.

2. No return is needed,

3 and 4 now irrelevant for hobby. As a business , you can contribute the full $800 when you file a tax return for the full $800. The income is not filed on the parent's return.  See What is the Kiddie Tax?

Please read though the IRS link and think about your child. This may have been the start of a huge enterprise! I think for 2024, it is probably just some pocket money that was earned. Keep your records of the earned income, the ROTH, everything. Time to start a financial notebook for your little artist.

[dimmi0205]

Check this Amy -your information is confusing me more 

https://www.jacksonhewitt.com/tax-help/tax-tips-topics/filing-your-taxes/do-minors-have-to-file-taxe....

https://www.irs.gov/pub/irs-utl/OC-Whateverystudentshouldknowaboutsummerjobsandtaxes.pdf

[dimmi0205]

Amy C-

Also hobby income does not qualifies for any roth contributions 

https://ttlc.intuit.com/community/retirement/discussion/can-i-use-hobby-income-to-offset-roth-ira-co...

[AmyC]

The IRS requires taxable earned income to make a ROTH contribution.  The rules for IRA contributions

For 2024, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $7,000 ($8,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

A business would require filing a sch C.

DoninGA was correct that less than $1300 of "other" income does not require filing a return. 

Reference: Publication 525 (2024), Taxable and Nontaxable Income