Custodial Roth IRA annual limits for 2023

[Bsch4477]

The program asks for filing status (single) and also asks if someone can claim you. 

[VolvoGirl]

We never asked....how old is your child?  It may make a difference.  

[jyeh74]

Their kids are all under 18

[TomD8]

Per IRS Publication 15:

"Payments for the services of a child under age 18 who works for their parent in a trade or business aren't subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they’re not subject to social security and Medicare taxes until the child reaches age 21."

https://www.irs.gov/publications/p15#en_US_2023_publink1000202301

[jyeh74]

@TomD8 

based on this “If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they’re not subject to social security and Medicare taxes until the child reaches age 21.”

This means that parents can pay their children to do chores around the house.  These payments can be considered “earned income”.  

[TomD8]

I would suggest that paying a child to make his own bed or clean his own room is very unlikely to be regarded as "earned income" in an IRS audit.  "Earned income" means income from a job.  Activities such as babysitting for another family, walking a neighbor's dog or giving a neighbor's child swimming lessons on the other hand likely would qualify.

[Opus 17]

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@jyeh74 wrote:

@TomD8 

based on this “If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they’re not subject to social security and Medicare taxes until the child reaches age 21.”

This means that parents can pay their children to do chores around the house.  These payments can be considered “earned income”.  

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Again, this is where you may want professional guidance because we are all amateurs, and even those of us who are professionals are not your professional, paid to defend you at an audit.

There is a big difference between paying your child to make the beds at your Bed and Breakfast, or to sweep out the barn where you have a business giving horse riding lessons; and paying them to make their own bed or to clean up after the family pet dog.