'You Can't Pay A Kid For Doing Chores,' Dave Ramsey Says — Then Shares How Filing Taxes On $1,223 Helped His 14-Year-Old Start A $50K Roth

Core Viewpoint - The discussion centers around the legitimacy of using household chore payments as earned income for funding Roth IRAs, which was dismissed by personal finance expert Dave Ramsey as not compliant with IRS regulations [2][3]. Group 1: Roth IRA Funding Requirements - Roth IRAs must be funded with legitimate earned income that can be reported and supported through a tax filing [3]. - Work performed inside the home, including chores, does not qualify as earned income for Roth IRA contributions [3][4]. - Income must come from verifiable labor that someone else would reasonably pay for, and must be reported on a tax return when required [4]. Group 2: Fair Market Value and IRS Compliance - Wages paid to children must reflect fair market value; paying significantly more than typical rates could lead to issues during an audit [5]. - Ramsey emphasized that any income used to fund a Roth IRA must be legitimate and accurately reported to the IRS [7]. Group 3: Examples of Qualifying Income - Ramsey provided examples of how his children earned qualifying income through tracked work outside the home and verifiable tasks at his office [6]. - Independent earnings from activities like babysitting, dog sitting, and yard work for others were also considered legitimate [6]. - An example was given where a child earned $1,223, which was reported accurately and contributed to a Roth IRA [7].