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Author Topic: IRA for teenager  (Read 3028 times)

purple monkey

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IRA for teenager
« on: December 07, 2015, 07:01:11 PM »
Hello,
My teenager (16) and I have been trying to find employment for the teenager.  No dice so far.  Seems like even McD's requires you know someone locally.
Anyway, already my teenage cleans houses, does lawns and other stuff.
How could we start a company so that she could contribute to an IRA?
Is this even possible?
TIA
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seattlecyclone

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Re: IRA for teenager
« Reply #1 on: December 07, 2015, 07:19:22 PM »
I don't think you would need to file paperwork to form an LLC or anything of that nature. If she just reports the income on her tax return as a sole proprietorship, that should be enough to qualify her for IRA contributions.
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purple monkey

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Re: IRA for teenager
« Reply #2 on: December 07, 2015, 07:22:46 PM »
Thank you.  As she is sixteen, can she have a sole proprietorship?
Sorry if this is dumb?
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purple monkey

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Re: IRA for teenager
« Reply #3 on: December 07, 2015, 07:26:48 PM »
So, maybe I should ask how do you fund an IRA for your teenager?
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terran

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Re: IRA for teenager
« Reply #4 on: December 07, 2015, 07:28:42 PM »
A sole proprietor is just a person who makes money not reported on a W2. Even cash paid by a customer who does not issue a 1099 or anything SHOULD be reported as income (not that a lot of people don't report any/all of such income).
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unno2002

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Re: IRA for teenager
« Reply #5 on: December 07, 2015, 07:43:03 PM »
Remember that declaring the income to be able to make an IRA deposit still means paying Social Security tax, and whatever other non "income tax" that needs to be paid, even though the income tax aspect goes away due to the IRA.

Consult with a CPA or other appropriate authority on taxes...
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MDM

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Re: IRA for teenager
« Reply #6 on: December 07, 2015, 09:26:04 PM »
Quote from: purple monkey on December 07, 2015, 07:01:11 PM
Hello,
My teenager (16) and I have been trying to find employment for the teenager.  No dice so far.  Seems like even McD's requires you know someone locally.
Anyway, already my teenage cleans houses, does lawns and other stuff.
How could we start a company so that she could contribute to an IRA?
Is this even possible?
TIA

How much money are we talking about here?  If less than $400 there is no self-employment tax, nor any income tax, but it is still earned income and may be invested in a Roth IRA.  E.g., see https://turbotax.intuit.com/tax-tools/tax-tips/Family/At-What-Income-Does-a-Minor-Have-to-File-an-Income-Tax-Return-/INF14178.html.

See http://forum.mrmoneymustache.com/investor-alley/where-to-start-a-child's-roth-ira-with-very-low-income/ for additional pertinent discussion.
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