Funding Roth IRA for minor children

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

I wonder what age you could start paying for these chores? Five?

PP here. As long as your child has earned income, you’re good to go. Five seems a bit early, but perfectly legal. The household chores and errands angle works, but you have to state that this earned income is associated with a different household (e.g., like a friendly neighbor). Same applies with walking dogs, watering plants, mowing lawns, and babysitting. As long as the work is for an outside entity, and payment can be in cash, the IRS rules allow it.

The 'friendly' neighbor has to pay the child for the labor. Otherwise, this is fraud.

Technically, but nothing stops us from gifting $7K to our neighbor, who then pays our DD a different $7K in earned income in cash, who then gives us the $7K in cash to deposit on her behalf. But, practically, carrying around and exchanging so much cash is risky so we just move $7K directly to a Roth IRA and log the earned income. Easy as pie.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

I wonder what age you could start paying for these chores? Five?

PP here. As long as your child has earned income, you’re good to go. Five seems a bit early, but perfectly legal. The household chores and errands angle works, but you have to state that this earned income is associated with a different household (e.g., like a friendly neighbor). Same applies with walking dogs, watering plants, mowing lawns, and babysitting. As long as the work is for an outside entity, and payment can be in cash, the IRS rules allow it.

The 'friendly' neighbor has to pay the child for the labor. Otherwise, this is fraud.

Technically, but nothing stops us from gifting $7K to our neighbor, who then pays our DD a different $7K in earned income in cash, who then gives us the $7K in cash to deposit on her behalf. But, practically, carrying around and exchanging so much cash is risky so we just move $7K directly to a Roth IRA and log the earned income. Easy as pie.

"Technically, yes this is fraud. But we could commit tax fraud in a more complicated way and we don't bother, so I feel confident telling people to commit tax fraud on the internet. [I am an idiot.]"

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

Holy F!! So glad you don’t do my tax return!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

I wonder what age you could start paying for these chores? Five?

PP here. As long as your child has earned income, you’re good to go. Five seems a bit early, but perfectly legal. The household chores and errands angle works, but you have to state that this earned income is associated with a different household (e.g., like a friendly neighbor). Same applies with walking dogs, watering plants, mowing lawns, and babysitting. As long as the work is for an outside entity, and payment can be in cash, the IRS rules allow it.

The 'friendly' neighbor has to pay the child for the labor. Otherwise, this is fraud.

Technically, but nothing stops us from gifting $7K to our neighbor, who then pays our DD a different $7K in earned income in cash, who then gives us the $7K in cash to deposit on her behalf. But, practically, carrying around and exchanging so much cash is risky so we just move $7K directly to a Roth IRA and log the earned income. Easy as pie.

This is fraud, dumbass. If you want to commit fraud, have at it. But don't encourage others to do it, and certainly don't encourage it while failing to acknowledge that it's fraud.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

Oh wow, this advice came from your MIL and neither of you validated it?

Are you filing separately, by paper, or does someone else do your taxes? It seems a little unbelievable that you’ve been doing this all these years and your tax filing software hasn’t caught you, unless the above applies.

Imagine how many people commit tax fraud in a year. The IRS can’t catch everyone every year every time.

I would talk to a CPA about this. Not only do you have to remove the funds, you owe an excise fee for every year you did this/the money remains in the HSA. You’ll also need to amend your returns and pay taxes on the excess contributions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

The IRS isn't checking things at this level of detail. I committed a couple of HSA snafus over the years.. One time, I closed out an HSA CD (about $10K) thinking it was a regular CD of a similar amount. Too late to put it back by the time i realized my mistake. Just didn't report it and have been fine. This was about 10 years ago.

More recently, I had the company switch insurance plans on me and the new plan was by the same provider and was titled 'high deductible plan'. I assumed it was an HDHP and continued contributing to my HSA (outside of work) for a couple of years before I realized my mistake. No problems from the IRS on this one either..

I know people who have been doing backdoor roths for years although they had six-figure rollover IRAs with no problems. They stopped once I told them they shouldn't, but no way were they going to unwind, report and get penalized.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

Unless your Mil is a tax lawyer or tax accountant, I don't know why you'd take advice from her. And love how you claimed this was a "little known loophole." This forum is full of idiots.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

Unless your Mil is a tax lawyer or tax accountant, I don't know why you'd take advice from her. And love how you claimed this was a "little known loophole." This forum is full of idiots.

Guess it was little known because it’s not true!

I’m surprised the PP didn’t google it the first time she was challenged on this thread.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

The IRS is underfunded so can’t catch everything. It comes up in the news from time to time. It was NPR earlier this week.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.

You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.

No, you can’t. There is no “padding” or “would be income.”

This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course.

Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….

BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible.

You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.

+1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses

PP, do you file separate taxes?

The family max is $7,300 per HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result.

Nope. The limit is per family.

For 2022, you and your spouse are both eligible individuals. You each have family coverage under separate HDHPs. You are 58 years old and your spouse is 53. You and your spouse can split the family contribution limit ($7,300) equally or you can agree on a different division. If you split it equally, you can contribute $4,650 to an HSA (one-half the maximum contribution for family coverage ($3,650) + $1,000 additional contribution) and your spouse can contribute $3,650 to an HSA.

https://www.irs.gov/publications/p969

Absolutely no doubling of the family contribution.

It’s always been this way.

Hmmm. Wow. My MIL recommended we pursue this investment strategy. So, I guess she basically fückêd us and we’re eventually going to get hit with some massive IRS penalty and bill?!? I don’t understand how our tax returns have been accepted this way for 5+ years.

double insured (at employer cost)

I've read some really idiotic things on DCUM, but this one might take the cake. Can you not step back and see how dumb this scheme is?