I'm 58 years old, and living at home with my parents. I do some things to help them out, but they are being a bit generous to let me stay in an addition that my grandmother built on to their house. I also do house and other work for them. I do a fair amount of gardening and various internet research for them, and a little house work. Mostly, it has been they eating the garden veggies grown last year (which were well worth what they paid).
My records have me earning just under $1,200 from them last year. I have contributed the earned amount to a newly-opened Roth IRA. I have also been doing investing, and while I have done well in previous years, this year I will be reporting substantial losses. I plan to invest the Roth IRA money as well. So far, I just have a spreadsheet showing the jobs I've done for them, the dates the work was done, how much I earned, and how much they paid me for it.
I'm concerned if the IRS wanted to challenge it, if they might need some other documentation. Last year, I filed my earnings as a sole proprietorship, and paid FICA etc., as per the relevant schedules. I will make well under $10k this year, what with my investment losses. I don't know if I will still need to pay FICA contributions, since year before last, it said I don't even need to file if I make under 10k. I don't believe I will have to file a 1040 due to my income.
- Will I still need to file as a Sole proprietor, even though my investment losses exceed my earnings this year?
- Will my spreadsheet be sufficient documentation to support this as earned income?
- Should my parents file something in order to support my claim that this is earned income? They are willing to.
Notes: I am aware I won't be able to take the money out for 5 years from opening the acct. without penalty, except for special situations. I am also aware there are limits on what I can contribute; and if I make enough outside of the IRA, I won't be able to contribute at all that year.