I just learned about this custodial Roth IRA from my friend who is opening one for her kid. She told me with everyone talking about 529 college savings, this is actually a better and more flexible way to save for college. She said you can start early, there?s actually no age limit.
https://www.marottaonmoney.com/fund-your-childs-roth-with-chore-income/
Has anyone done this? It says that there are two ways to categorize your kids for earned income from chores. One is independent contractor and one is household employee. The IC has tax reporting purposes so I?m not sure why anyone would go this route. The household employee is what she?s trying to do. Basically, she?s going to make her kids do chores around the house and pay them. This teaches them the value of saving at an early age and takes advantage of compounded interest early so they can let it grow and use it for college if they choose to at age 18.
What is not too clear is how IRS expects her, as the parent, to log pay or work, if any? If she is going to pay her kids a few thousand annually: 1) do the kids have to do individual taxes (I think the answer is no if they are considered a ?household employee?) and 2) does the parent have to report anything on her 1040?
https://www.marottaonmoney.com/fund-your-childs-roth-with-chore-income/
Has anyone done this? It says that there are two ways to categorize your kids for earned income from chores. One is independent contractor and one is household employee. The IC has tax reporting purposes so I?m not sure why anyone would go this route. The household employee is what she?s trying to do. Basically, she?s going to make her kids do chores around the house and pay them. This teaches them the value of saving at an early age and takes advantage of compounded interest early so they can let it grow and use it for college if they choose to at age 18.
What is not too clear is how IRS expects her, as the parent, to log pay or work, if any? If she is going to pay her kids a few thousand annually: 1) do the kids have to do individual taxes (I think the answer is no if they are considered a ?household employee?) and 2) does the parent have to report anything on her 1040?