My friend sent me this link https://www.marottaonmoney.com/fund-your-childs-roth-with-chore-income/
She is trying to open up a custodial Roth IRA for her young kids to teach them the value of saving at an early age and pay them to do chores around the house. It says that the first decision that must be made is how the child will be hired. When it comes to chores, there are two main options.
- The child may be a self-employed independent contractor.
- The child may be a household employee of their parents.
Number 1 seems like it is not realistic since they would have to report income and pay taxes on schedule SE. Not sure why any parent would want to make their child an independent contractor just to do chores around the house? Number 2 is what she is thinking that she wants to do. Essentially pay her kids to do chores around the house. Question is, if she is paying her kids cash, does she have to create a log for her kids for every single chore? i.e. Pay $20 to wash the car on this date. Pay $10 to clean the kitchen. If she is going to pay them up to the limit of $6000 annually for numerous jobs, does IRS usually check these things or does she have to report it on her 1040?
