Summer break is ten weeks. Add winter break and spring break and you get somewhere around fourteen weeks of the year when your child is not in school. That is more than a quarter of the calendar, and for a lot of family business owners, it is plenty of time to pay legitimate wages, fund a Roth IRA, and give your kid a genuine financial head start before they ever leave home.
The question most parents run into is whether the IRS cares that the work stopped when school started back up. The answer, practically speaking, is no. What matters is not the calendar spread of wages, it is the total.
TL;DR: Wages paid only during summer and holiday breaks can absolutely qualify your child for the full annual Roth IRA contribution, as long as total earned wages for the year equal or exceed the contribution amount ($7,500 for 2026). The IRS looks at total annual earned income, not how evenly it is spread. Real work, reasonable pay, and a W-2 are the three things that actually matter.
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Written by the Kids Payroll team, grounded in IRC §3121(b)(3)(A) and current IRS guidance on legitimately employing your children in a family business.
Yes, Summer-Only Wages Can Max Out a Child's Roth IRA
The Roth IRA contribution rule under IRC §408A is clean: a person can contribute up to the annual limit or their total earned income for the year, whichever is less. That is it. No requirement for twelve months of paychecks. No minimum number of workweeks. A child who earns $7,500 in June and July has the same Roth eligibility as one who earned $625 each month across the year.
So the scheduling concern most parents have, "will the IRS question why my child only worked in the summer?", is mostly a non-issue as long as the substance holds up. The IRS scrutinizes whether the work was real and whether the wage was reasonable. A seasonal schedule is not inherently suspicious. Think of any teenager who works at a beach resort or a summer camp. Seasonal work is completely normal.
What the IRS does care about, and what tax courts have emphasized in cases like Eller v. Commissioner, 77 T.C. 934 (1981), is whether the services were genuinely performed, the compensation was market-rate for the work, and the records can prove both. Seasonal timing fits that mold easily if you do your homework.
For a full breakdown of the Roth rules specific to minors, including custodial account setup and contribution limits, see Roth IRA for kids: the complete rule guide.
How Much Does Your Child Need to Earn?
The 2026 Roth IRA contribution limit is $7,500. To contribute the full amount, your child needs at least $7,500 in W-2 wages for the year.
Here is the layered picture that makes this strategy genuinely powerful:
Key definitions:
- Earned income: wages, salaries, or net self-employment income. This is what unlocks Roth eligibility.
- Standard deduction (dependent): under IRC §63(c)(5), a dependent child's standard deduction equals their earned income plus $450, capped at the regular single filer amount ($16,100 for 2026). So wages up to $16,100 generate zero federal taxable income.
- Roth IRA contribution limit: the lesser of earned income or the annual limit ($7,500 for 2026).
That means a child earning $7,500 during summer break owes zero federal income tax on those wages AND can contribute the full $7,500 to a Roth IRA. The parent deducts the wages as a business expense. The child builds a retirement account. The IRS collects nothing at the federal level on those earnings.
Is every dollar of that $7,500 Roth contribution going into an account that will grow tax-free for potentially fifty years? Yes. That is the point.
For a deeper look at the full tax-free wage ceiling and how to stay under it, see how to pay your child tax-free in 2026.
The Math: A Real Summer Payroll Example
Let us walk through a concrete scenario.
Assumptions:
- Child: 14 years old
- Business structure: sole proprietorship (FICA and FUTA exemptions apply under IRC §3121(b)(3)(A) and IRC §3306(c)(5) for children under 18 and under 21, respectively)
- Work schedule: 10 weeks of summer (June through mid-August) plus 2 weeks over winter break
- Hours per week: 15 hours
- Hourly wage: $12 (appropriate for social media content scheduling and photo organization, which are legitimate age-appropriate tasks)
The arithmetic:
- Total weeks worked: 12
- Total hours: 12 weeks x 15 hours = 180 hours
- Total wages: 180 hours x $12 = $2,160
That falls short of the $7,500 Roth maximum. So let us adjust.
Adjusted scenario:
- Bump hours to 20 per week during summer (10 weeks) and 15 per week over two holiday breaks (4 weeks combined)
- Summer: 10 weeks x 20 hours x $12 = $2,400
- Holiday breaks: 4 weeks x 15 hours x $12 = $720
- That gets you to $3,120. Still short.
To max out the Roth, you need $7,500. Let us try a higher rate for an older child doing more skilled work.
Revised scenario:
- Child: 16 years old
- Task: video editing short-form content for the business's social accounts (a genuine, marketable skill)
- Hourly rate: $20 (reasonable for basic video editing)
- Summer: 10 weeks x 20 hours x $20 = $4,000
- Winter break: 2 weeks x 20 hours x $20 = $800
- Spring break: 1 week x 20 hours x $20 = $400
- Total wages: $5,200
Still under $7,500 for the full Roth max. One more adjustment:
Final scenario:
- Same 16-year-old, video editing
- Rate: $25/hour (still within market range for a teenager with demonstrated skill)
- Summer: 10 weeks x 20 hours x $25 = $5,000
- Winter break: 2 weeks x 20 hours x $25 = $1,000
- Spring break: 1 week x 20 hours x $25 = $500
- Additional project work across two holiday weekends: 8 hours x $25 = $200
- Total wages: $6,700
At $6,700 in wages, the child can contribute $6,700 to a Roth IRA (the lesser of earned income or the $7,500 limit). That is not the full max, but it is close. Federal income tax on those wages? Zero, because $6,700 is well under the $16,100 standard deduction. The parent deducts the full $6,700 as a business expense.
To hit the full $7,500 Roth max, you need exactly $7,500 in wages. At $25/hour, that is 300 hours of work spread across the school breaks. Across 13 weeks of available break time, that is about 23 hours per week, which is entirely doable for a motivated teenager and a business with real work to offer.
The takeaway: the math works, but it requires intentional planning. A 12-year-old doing light tasks at $10/hour is not going to hit $7,500. A 16-year-old doing skilled creative or administrative work at $20-$25/hour across all major school breaks can get there.
What the IRS Actually Cares About
The seasonal schedule is not the problem. These three things are.
1. Is the work real?
The job has to serve the business, not the household. Your child editing video content for your company's Instagram is legitimate business work. Your child mowing the lawn at your house is not, even if you tell yourself the house doubles as a home office. Courts are not sympathetic to that argument.
Age-appropriate tasks for teenagers include social media management, video editing, bookkeeping assistance, customer service, packaging, and product photography. For a fuller list, see legitimate tasks you can pay your kids to do.
2. Is the wage reasonable?
Paying your 15-year-old $75/hour for "consulting" will not survive scrutiny. The wage should reflect what you would pay a non-family employee for the same work. $15-$30/hour for skilled teenager tasks is generally defensible. $50+/hour is going to require a very good explanation. The reasonable wage guide for kids on payroll walks through how to establish and document a defensible rate.
3. Do you have records?
Time logs, a written job description, and issued paychecks (not cash stuffed in an envelope) are the minimum. When the child funds a Roth IRA, you also need to issue a W-2. Do not skip the W-2 and issue a 1099-NEC instead. A 1099 triggers self-employment tax on the child, wiping out one of the main benefits of the whole strategy.
Entity Structure: This Only Works in the Right Business Type
The FICA exemption under IRC §3121(b)(3)(A) applies when a child under 18 is employed by a parent operating as a sole proprietor, a single-member LLC treated as a sole prop, or a partnership where both partners are the child's parents. If your business is an S-corp or a C-corp, the exemption does not apply by default.
If you run an S-corp, there is a legitimate workaround: a separate Family Management Company (a sole prop or single-member LLC owned by the parents) employs the children and charges a management fee back to the S-corp. This preserves the FICA exemption. It needs to be a real entity doing real work, not a shell on paper. The setup is explained in detail at how to set up a family management company.
One Rule You Cannot Bend: No Overfunding the Roth
If your child earns $5,200 during school breaks, the Roth contribution is capped at $5,200. Contributing $7,500 when the child only earned $5,200 creates an excess contribution. Under IRC §4973, the IRS charges a 6% excise tax on excess contributions for every year they sit in the account. Remove the excess and its earnings before the tax filing deadline to stop the clock on that penalty.
This is the one place the strategy can genuinely go sideways. Track actual wages before making the Roth contribution. Not the amount you planned to pay. The amount actually paid.
Does Your Child Need to File a Tax Return?
A dependent child with only earned income is not required to file a federal return unless wages exceed the standard deduction ($16,100 for 2026). If your child earned $7,500 and owes zero federal tax, filing is technically optional.
That said: file anyway. When a Roth IRA is involved, a filed return creates a documented paper trail connecting the wages to the contribution. The IRS does not see Roth contributions on the child's return (they are after-tax and reported to the IRS by the custodian on Form 5498), but the return ties everything together if questions ever arise.
Also worth a quick check: state income tax. The federal standard deduction shields wages up to $16,100. State rules vary widely. California's dependent standard deduction is roughly $5,540. New York's is around $3,100. Your child could owe state tax even when federal tax is zero. A CPA familiar with your state can flag this quickly.
Key Takeaways
- Total annual earned income, not weekly scheduling, determines Roth IRA eligibility.
- Summer-only and holiday-only wages are legitimate if the work is real and the wage is market-rate.
- To max out the 2026 Roth limit of $7,500, your child needs at least $7,500 in W-2 wages for the year.
- Wages up to $16,100 generate zero federal income tax for a dependent child under IRC §63(c)(5).
- Issue a W-2, keep time logs, and document the job description.
- FICA exemptions require the right entity structure (sole prop, single-member LLC, or parents-only partnership).
- Check your state's dependent standard deduction. It may be much lower than the federal amount.
Bottom Line
If your child is going to spend their summer on their phone anyway, they might as well be doing something that feeds a Roth IRA. The summer-only payroll approach works, the math just needs intentional planning. Pick work your business genuinely needs, set a wage that would pass the smell test if a stranger did the job, log the hours, and issue a W-2 by January 31.
The Kids Payroll app makes the W-2, time tracking, and payroll record-keeping straightforward, so the documentation piece does not fall apart in April. Sign up at kidspayroll.com to get your child's payroll set up before the next school break.
FAQ
Does the IRS require wages to be paid year-round for a child to qualify for a Roth IRA?
No. The only requirement under IRC §408A is that total Roth contributions for the year do not exceed the child's total earned income for that year. There is no rule that wages must be distributed evenly across months or weeks. A child who earns $7,500 entirely during summer break qualifies for the same Roth contribution as one paid monthly.
What happens if I contribute more to my child's Roth than they earned during school breaks?
That is an excess contribution under IRC §4973 and triggers a 6% annual excise tax on the excess amount for every year it stays in the account. Fix it by withdrawing the excess plus any earnings it generated before the federal tax filing deadline (including extensions). Track actual wages paid before making the Roth deposit.
Can I pay my child a high enough wage to justify a Roth max in just a few weeks?
Yes, if the wage rate is genuinely reasonable for the work performed. A 16-year-old doing legitimate video editing or web work at $25/hour working 20 hours per week during summer break can realistically reach $7,500 across a full summer. What you cannot do is pay $75/hour for tasks that do not warrant that rate. The wage must reflect what you would pay a non-family employee for the same job.
Do I need to issue a W-2 even if my child only worked during school breaks?
Yes. Any child who is on payroll, regardless of the season, should receive a W-2 if you want the wages to count as earned income for Roth IRA purposes. A 1099-NEC triggers self-employment tax on the child, which eliminates most of the benefit. If the work qualifies the child as an employee under the rules, issue a W-2.
Does the FICA exemption still apply for seasonal work in a sole proprietorship?
Yes. IRC §3121(b)(3)(A) exempts wages paid by a sole proprietor (or a spousal partnership) to a child under 18 from FICA taxes. That exemption does not depend on whether the work is full-time, part-time, or seasonal. It applies to any wages paid by a qualifying parent-owned entity to a qualifying child employee.
Sources
- IRC §408A, Roth Individual Retirement Accounts
- IRC §3121(b)(3)(A), FICA exemption for children employed by a parent
- IRC §3306(c)(5), FUTA exemption for children under 21
- IRC §63(c)(5), dependent standard deduction
- IRC §73, services of a child taxed to the child
- IRC §4973, excise tax on excess IRA contributions
- IRS Publication 929, Tax Rules for Children and Dependents
- IRS Publication 15, Employer's Tax Guide
- Eller v. Commissioner, 77 T.C. 934 (1981)
This article is for educational purposes only and is not tax or legal advice. Consult a qualified CPA before putting your kids on payroll.