I'm getting all of the crazy questions today!

We have a customer who wants to open Roth IRAs for his two teenage children who have earned income from babysitting and lawn mowing. There are no W2 Wage Statements; however, the customer assures us he has good records of their earnings.

Do you open Roth IRAs for minors? If so, what is your criteria? For example, do you require the W2 to prove taxable income?

There are no age restrictions in either direction for a Roth IRA.

The only requirement is that that have earnered income, and that is their burden of proof to the Federal Gov't, not yours.

I would recommend that the teenage children open them themselves.

Any chance dad is talking about an educational IRA, I doubt, but somethign to consider.

No, he's not talking about the educational IRA. We sort of wondered why. It seems like it would be a better investment vehicle for a child that age.

So the burden of proof would be on the minor? Our IRA Administrator is of the opinion that the IRS could come back on us because the IRA holder is a minor.

I am reading about the "Compensation Safe Harbor" now, but it appears to refer to the IRA holder; not the bank.

One other thought I had is the requirement that the earnings be taxable earnings; not necessarily taxed, but taxable. I am not exactly sure what is meant by that.

From the IRS website:

http://www.irs.gov/publications/p590/ch02.html#d0e8836

Specifically:

Is there an age limit for contributions? Contributions can be made to your Roth IRA regardless of your age.
They would be a little late for an educational IRA at this point of the game.

He is prolly wanting to get his kids int he mode to save for retirement...I wish more parents were as forward thinking.

In redgards to the taxable portion....it does not matter if the individuals earnings are taxable or not, it is just that they do not get a special deduction for Roth contributions, like you do for traditional IRA's.

Do you normally have all of your customer show proof of income before opening an IRA account for them? No, you take their word for it and let them hash it out.