[Kathy]

My high school daughter is looking to open a Roth IRA based on pet sitting, babysitting, and other non W2 jobs.

My question is–How does the IRS confirm that she has earned income, or do they?

I don’t want to lead her in the wrong direction if not yet having a W2 job would cause issues for her in the future.

She is looking to be a lifeguard or camp counselor next summer.

[Stacy]

If she earns more than $400 net from her self employment activities she needs to file a tax return using a schedule C.

This is also proof of earned income.

[Lisa]

They don’t confirm it. Keep a spreadsheet and show it if you ever get audited.

Open the Roth!

[Elizabeth]

I wish I had known about Roth IRA contributions when I was a teen! Good for your daughter

[Cari]

If she’s earning money, she should file (and pay) taxes. Easy peasy. Schedule c for her small businesses.

She probably will have to pay a bit in taxes for the income she claims…

like social security and self employment.

[Tony]

Just keep records and file taxes for her. She won’t pay taxes, it will just be on file yearly.

That way if they ever have a problem they should of addressed it then.

But you just show your records of date and dollar amount..

[Michelle]

Is she reporting it on her tax return?
The Roth contribution amounts are limited by earned income and how it’s reported.

I suggest discussing with your own CPA before you contribute toouch or your daughter fails to make estimated tax payments if self-employed.

[Joy]

If over $399, she needs to file taxes and pay the self employment tax of 15%.

That will make the income earned income and then can be put into a Roth.

[Steven]

I recommend keeping a spreadsheet. I suggest it identify date, “employer”, how much time she worked, a brief description of the task(s) completed, and the pay.

Make sure you have a reliable backup of the spreadsheet for the day the working file or the computer it’s stored on dies.

Murphy’s law would result in the IRS possibly asking for the work/pay history shortly after you lose the file due to file or storage location getting damaged.

If you store paper copies of tax returns, I’d save a paper printout of the spreadsheet with each tax return, too.

[Viv]

Just have her save her money and she can make a contribution the year she has earned income on paper (W2).

Making a few $100’s is more like hobby income.

It’s not a business, she’s not self employed.

[Author]

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