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This sounds crazy but can I file 1099 for my daughter for the chores she does? If so, can I put all the money into her IRA? Say I am willing to pay her $15/hr up to 3 hrs per week for basic cleanings and yard services ($2340/yr). The amount is lower than $6100 per year for her to report income taxes.
The benefits would be: 1) IRA has more investment choices than 529, 2) IRA does not count as her assets when applying for college and 3) it still can be withdrawn for her education expenses.
Can I do that? Should she pay for SS and Medicare taxes? Can I still claim her as a dependent?
This sounds crazy but can I file 1099 for my daughter for the chores she does? If so, can I put all the money into her IRA? Say I am willing to pay her $15/hr up to 3 hrs per week for basic cleanings and yard services ($2340/yr). The amount is lower than $6100 per year for her to report income taxes.
The benefits would be: 1) IRA has more investment choices than 529, 2) IRA does not count as her assets when applying for college and 3) it still can be withdrawn for her education expenses.
Can I do that? Should she pay for SS and Medicare taxes? Can I still claim her as a dependent?
If you decide to start a small home based business, ( for example blogging, consulting, landscaping etc ) here is some suggestions to pay your daughter legally and avoid the complicated kiddie tax rules that might be easy to make a mistake. Then she can learn responsibility, gives you extra time together, learn a new skill, discipline and give you extra to work with in your budget. Make it a business and not a hobby.
Check out this profit from paying your kids. I know some that do a small family business and helps them financially and with estate and tax planning. So look at it from a new angle if you have the time and are so inclined. Many usually have some skills that would be able to help and be shared with others in a small business setting, that the kids love and benefit from. Just a thought. Hope that helps, if not throw it out and ignore the one's who will come on to discourage, mock, insult or not help. How they have the time to do it to so many posts is amazing. Profit From Paying Your Kids--Special Tax Tips for Homebased Entrepreneurs for the Current Tax Year
If you decide to start a small home based business, ( for example blogging, consulting, landscaping etc ) here is some suggestions to pay your daughter legally and avoid the complicated kiddie tax rules that might be easy to make a mistake. Then she can learn responsibility, gives you extra time together, learn a new skill, discipline and give you extra to work with in your budget. Make it a business and not a hobby.
Check out this profit from paying your kids. I know some that do a small family business and helps them financially and with estate and tax planning. So look at it from a new angle if you have the time and are so inclined. Many usually have some skills that would be able to help and be shared with others in a small business setting, that the kids love and benefit from. Just a thought. Hope that helps, if not throw it out and ignore the one's who will come on to discourage, mock, insult or not help. How they have the time to do it to so many posts is amazing. Profit From Paying Your Kids--Special Tax Tips for Homebased Entrepreneurs for the Current Tax Year
Thanks AngelMama for the info.
I did some google research and found that I need to have a business to issue w-2 to avoid payroll taxes.
If you withdraw money from a Roth for education expenses it then becomes income and counts against financial aid, etc. That being said, if you are in a position to pay a child $15/hour to clean her room, you probably won't get financial aid anyway. The earlier you can start an IRA the better, but don't use it for college, save it for retirement.
Private college costs $60,000 a year. Large families can get financial aid with incomes into the $300-400K range.
No they are not. If they have a good student they may get some academic/merit scholarships but they are not getting financial aid even with a "large" family.
Just for the fun of it--put in a family of 10 with 4 kids in college making $300,000....you get student loans, which everyone can get, but no "financial aid" at all. The expected family contribution for that income level is $76,580...well above the $60,000 to attend.
No they are not. If they have a good student they may get some academic/merit scholarships but they are not getting financial aid even with a "large" family.
Just for the fun of it--put in a family of 10 with 4 kids in college making $300,000....you get student loans, which everyone can get, but no "financial aid" at all. The expected family contribution for that income level is $76,580...well above the $60,000 to attend.
I think the key is having multiple kids in college at the same time.
I think the key is having multiple kids in college at the same time.
Yeah, like the 4 cited by Qwerty in his/her example?
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