Minimum Age

A 15-year old has a specific fishing license in Alaska that allows him to make earned income from fishing. They receive a Form 1099 as a sole proprietor. CPA confirmed they are not an employee.

Can a 15-year old obtain a business EIN and then set up a 401(k) plan based on their net earned income, or is there some minimum age needed to be able to do this?

I'm not aware of a minimum age requirement. However, I've never specifically investigated the question.

How much is he making from fishing to make setting up a 401(k) plan worth the effort and expense?  How much could the tax savings be?

Also, something about a 15-year old with earned income using it for neither college savings (and PLEASE don't say that the 401(k) plan would be used for that purpose!!!!  UGH!) nor to help pay for clothes, electronics, movies, and other niceties strikes me (for what that's worth) as excessively prudent.  Mid-20's, by almost any rational perspective, is soon enough to be saving for retirement.  401(k)s are ONLY supposed to be used for retirement.

Due to attribution (under age 21), he should be able to join a parent's business 401(k) plan as a participating employer. And, no, what is prudent for use of this person's earnings was not questioned ...

Anyway, I also am not finding an age minimum.

Just curious, but what is the arrangement whereby he gets a 1099?  Who is the payer filing the 1099?  Does he sell fish or his services, and if it's services how is he an IC?  Sounds fishy to me.   

Just curious does he really make the IRA limits too low?  If not that seems easier but I don't see any law that stops this from happening. 

6 hours ago, jpod said:

Just curious, but what is the arrangement whereby he gets a 1099?  Who is the payer filing the 1099?  Does he sell fish or his services, and if it's services how is he an IC?  Sounds fishy to me.   

I don't know how it works in Alaska, but on the East cost. If you do the fishing yourself you receive payment for each day's catch. You decide when, where, how and what species. You use your own equipment and exercise full control. There isn't a cleaner definition of IC than that.

Even if you sign-on as a one or multi-day crew member, they always get paid based on the catch. I have never seen anyone as a W-2 employee. The same fisherman will run his own smaller boat and sign-on as a crew member of different boats at different times.

Don't understand why he doesn't use an IRA.  Why bother with all the extra structure, reporting requirements, etc. of a 401(k).  How much could he possibly be earning?

15-year olds do generally go to school in Alaska, don't they?

3 minutes ago, My 2 cents said:

Don't understand why he doesn't use an IRA.  Why bother with all the extra structure, reporting requirements, etc. of a 401(k).  How much could he possibly be earning?

15-year olds do generally go to school in Alaska, don't they?

Depending on the arrangement and the catch, the income can be quite significant just working weekends.  Each trip wont be a success but here in the gulf you are talking  thousands for successful 2-3 day trip. He can easily exceed IRA limits working weekends and summer break.

John Feldt, I doubt that the Internal Revenue Code precludes a sole-proprietor business from establishing a § 401(a)-qualified plan merely because the proprietor is younger than 21 or 18.

Some banking, insurance, and securities businesses are unwilling or reluctant to make a contract with a person who has not yet attained the age of competence to make a non-voidable contract.

Others reason that a young businessperson who seeks to save or invest seems a good risk.  Some might desire the loyalty of such a customer.

Even with the businesses that are willing to deal with a young person, doing so might require the approval of someone beyond the ordinary front-line processor.  So it might make sense to inquire about this point before sending an application.