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Reply to "Funding Roth IRA for minor children"
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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.[/quote] You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.[/quote] No, you can’t. There is no “padding” or “would be income.” [/quote] 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….[/quote] I wonder what age you could start paying for these chores? Five?[/quote] PP here. As long as your child has earned income, you’re good to go. Five seems a bit early, but [b]perfectly legal[/b]. The household chores and errands angle works,[b] but you have to state that this earned income is associated with a different household (e.g., like a friendly neighbor)[/b]. 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. [/quote] "Perfectly legal" as long as you find a friendly someone willing to lie to the IRS for you![/quote]
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