@DavidD66 or other Experts- I have a "what's required to be filed by parent vs grandma" question but for a different end goal: Roth IRA contribution for grandma.
Scenario:
1. Grandma is age 66 and helps take care of grandchildren during school breaks (e.g. spring break, winter break, holidays)
2. Grandma is a widow and RETIRED, is frugal, and lives off of Social Security and decent sized savings account (also has retirement accounts that she has NOT needed to withdraw from)
Goal:
1. Grandma wants to maximize grandchildren's inheritance from her assets (grandchildren will inherit everything). Specifically, Grandma wants to contribute to a Roth IRA so that the earnings can grow tax-free, and grandchildren (ages 3 and 5) are the Roth beneficiaries.
2. From a MAGI (modified adjusted gross income) perspective, Grandma meets the Roth requirements. However, since Grandma is retired, she still needs IRS recognized Earned Income to contribute into the Roth.
Questions
1. Can Parents write Grandma a $6,500 check for babysitting work this year so that amount can be recognized as Earned Income in order to fund Grandma's Roth IRA?
2. If so, what tax forms need to be filed by Parent and Grandma so that the $6,500 is officially considered earned income? (note: parents in this situation will NOT need to claim the Child and Dependent Care credit through Grandma's babysitting money. They plan to claim through other daycare/pre-school expenses etc)
