Q1. 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?
A1. Yes
Q2. If so, what tax forms need to be filed by Parent and Grandma so that the $6,500 is officially considered earned income?
A 2. The Parents don't need to file any forms (although that is an option). If Grandma baby sits in the parent's home, she files the income as Household employee income on line 1b of form 1040 (this is a new line starting in 2022). If she sits in her own home, she files it as self employment, on Schedule C, and also files Schedule SE to pay "self employment tax" (social security and medicare).
