Roth IRA for kids

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newbie003
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Roth IRA for kids

Post by newbie003 »

Hi. It's my understanding that a child (9 years old for example) can open a ROTH IRA and contribute earned income. I believe that earned income could be yard work, snow shoveling, baby sitting, etc...

If this is indeed the case, and one does open a ROTH for their child, and the child contributes a couple of hundred dollars a year (from the income sources mentioned above), does one require any proof of said work? In other words, should the child literally create an invoice for the yard work and have some sort of proof of income, even if it's just a neighbor giving him $20 to help out around the yard?

Thank you.
cresive
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Re: ROTH Ira for kids

Post by cresive »

I am not a lawyer, but it is my understanding that you have to have documented income to qualify for a Roth. You can also only deposit up to your income level. If your child only makes $1000 doing lawns, then your limit is $1000 to donate into your Roth.
BeautifulDisaster
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Re: ROTH Ira for kids

Post by BeautifulDisaster »

The best way to handle your son's income is to keep careful records of each job, when it was done, for whom, and how much he was paid. And it would make a stronger case if he mowed lawns not just for you but for other customers as well
Source: https://www.kiplinger.com/article/savin ... h-ira.html
Topic Author
newbie003
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Re: ROTH Ira for kids

Post by newbie003 »

Perfect, thanks!
snowman
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Re: ROTH Ira for kids

Post by snowman »

We did that with our kids. It was more about the financial lesson, not the amount. We opened accounts at TDA and were buying single shares of VTI or VEU when enough funds were available. No minimums, no fees (the accounts have since moved to Vanguard).

I told the kids to keep earnings records in a simple notebook that I checked - date, service performed, to whom, dollar amount. It's what IRS agent told me to do over the phone when I first inquired.
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newbie003
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Re: ROTH Ira for kids

Post by newbie003 »

snowman wrote: Fri Jan 26, 2018 11:57 am We did that with our kids. It was more about the financial lesson, not the amount. We opened accounts at TDA and were buying single shares of VTI or VEU when enough funds were available. No minimums, no fees (the accounts have since moved to Vanguard).

I told the kids to keep earnings records in a simple notebook that I checked - date, service performed, to whom, dollar amount. It's what IRS agent told me to do over the phone when I first inquired.
Thanks so much. That's exactly what I was planning to do (a simple record of earnings).

Thanks again!
pshonore
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Re: ROTH Ira for kids

Post by pshonore »

Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
H-Town
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Re: ROTH Ira for kids

Post by H-Town »

pshonore wrote: Fri Jan 26, 2018 12:09 pm Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
Except that those kids are on their parents' return.
Time is the ultimate currency.
Spirit Rider
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Re: ROTH Ira for kids

Post by Spirit Rider »

The work they do for neighbors should generally be considered household help not self-employment. A Form 1040, Schedules C and SE along with SE tax would be required for self-employment > $400 from all clients combined.

For household help is no W-2 required < $600/yr, no SS/MC < $3000/yr and no FUTA < $1000/qtr. These are all amounts from each employer. There now (2018+) is no income tax return/withholding < $12,000.

As mentioned there should be a notebook/folder kept to record/retain any wage information.

I tend to disagree with pshonore that it is necessary to file a tax return when there are W-2s. However, if there is no W-2, it does establish a SOL on the wages. Otherwise, you need to keep the wage proof forever. There is no SOL for the filing of Form 5329 to pay excise taxes on excess contributions. No wage proof, all contributions could be considered excess contributions.
snowman
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Re: ROTH Ira for kids

Post by snowman »

newbie003 wrote: Fri Jan 26, 2018 12:03 pm
snowman wrote: Fri Jan 26, 2018 11:57 am We did that with our kids. It was more about the financial lesson, not the amount. We opened accounts at TDA and were buying single shares of VTI or VEU when enough funds were available. No minimums, no fees (the accounts have since moved to Vanguard).

I told the kids to keep earnings records in a simple notebook that I checked - date, service performed, to whom, dollar amount. It's what IRS agent told me to do over the phone when I first inquired.
Thanks so much. That's exactly what I was planning to do (a simple record of earnings).

Thanks again!
No problem. Just remember that paying your kids to do chores does not count as earned income. Babysitting (not for siblings) does count, but the wage has to be "reasonable" - i.e. $10/hour, not $50/hour babysitting. If you have business like I did, you can pay them reasonable wages - i.e. I paid them for shredding documents or mailing marketing materials. At that age they didn't work much, and my wages were low, so they were never over $400/year, so no tax filing issues.

I would have recommended TDA for Roth IRA, but they got rid of commission-free Vanguard ETFs couple months ago. Vanguard is now the best place - no minimums, no fees, no commissions. Interface not as nice, but kids don't care, and neither should you. Good luck!
Topic Author
newbie003
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Re: ROTH Ira for kids

Post by newbie003 »

That's actually a great idea. We do have a small family business and the kids actually do help shred on occasion (plus the occasional other small task)!

Separately, would I open the ROTH similar to how I have regular accounts in their name (i.e. UTMA...) or is it just in their name alone?
pshonore
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Re: ROTH Ira for kids

Post by pshonore »

thangngo wrote: Fri Jan 26, 2018 12:22 pm
pshonore wrote: Fri Jan 26, 2018 12:09 pm Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
Except that those kids are on their parents' return.
And where on their parent's return do kids put their earned income?
snowman
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Re: ROTH Ira for kids

Post by snowman »

You will open Roth IRA Minor account - where a minor is your kid, and you are the custodian. It's not UTMA, and the advantage is that when your kids apply to college, this account (unlike UTMA) will not even be reported on FAFSA as asset because it is a retirement account.

Once they reach adult age (varies by state), you have to request account change through your broker. I was surprised that it's not an automated process. TDA has a form you have to fill out, Vanguard can handle it over phone/secure message.

Hope this helps!
Topic Author
newbie003
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Re: ROTH Ira for kids

Post by newbie003 »

snowman wrote: Fri Jan 26, 2018 1:39 pm You will open Roth IRA Minor account - where a minor is your kid, and you are the custodian. It's not UTMA, and the advantage is that when your kids apply to college, this account (unlike UTMA) will not even be reported on FAFSA as asset because it is a retirement account.

Once they reach adult age (varies by state), you have to request account change through your broker. I was surprised that it's not an automated process. TDA has a form you have to fill out, Vanguard can handle it over phone/secure message.

Hope this helps!
Thank you!
H-Town
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Re: ROTH Ira for kids

Post by H-Town »

pshonore wrote: Fri Jan 26, 2018 1:31 pm
thangngo wrote: Fri Jan 26, 2018 12:22 pm
pshonore wrote: Fri Jan 26, 2018 12:09 pm Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
Except that those kids are on their parents' return.
And where on their parent's return do kids put their earned income?
That's for their parents to figure it out, not the kids.
Time is the ultimate currency.
Spirit Rider
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Re: ROTH Ira for kids

Post by Spirit Rider »

thangngo wrote: Fri Jan 26, 2018 1:50 pm
pshonore wrote: Fri Jan 26, 2018 1:31 pm
thangngo wrote: Fri Jan 26, 2018 12:22 pm
pshonore wrote: Fri Jan 26, 2018 12:09 pm Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
Except that those kids are on their parents' return.
And where on their parent's return do kids put their earned income?
That's for their parents to figure it out, not the kids.
You obviously did not have your pshonore: sarcasm filter on.

Children must file their own return if they have any earned income. The parents can only elect to file their children's unearned income on their return if there is no earned income and the unearned income < $10,500. I do not know if this amount changes for 2018.
Last edited by Spirit Rider on Fri Jan 26, 2018 3:17 pm, edited 1 time in total.
Spirit Rider
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Re: ROTH Ira for kids

Post by Spirit Rider »

newbie003 wrote: Fri Jan 26, 2018 1:25 pm That's actually a great idea. We do have a small family business and the kids actually do help shred on occasion (plus the occasional other small task)!
If your family business is taxed as a sole proprietorship or a partnership where your spouse is the only other partner, there are special tax benefits. You/your children < 18 do not have to pay SS/MC, < 21 you do not have to pay FUTA and in many states you do not have to pay SUTA and Workman's Compensation insurance premiums.
Separately, would I open the ROTH similar to how I have regular accounts in their name (i.e. UTMA...) or is it just in their name alone?
While they may have different names, they are all Roth UTMA accounts
PDX_Traveler
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Re: ROTH Ira for kids

Post by PDX_Traveler »

I thought Vanguard charges annual account maintenance fees of $20, which for a small account of ~$1000 is quite significant... Is this not correct?
I was considering TD Ameritrade despite the inconvenience of maintaining a small separate account, because of this. Thanks -
snowman wrote: Fri Jan 26, 2018 1:15 pm
newbie003 wrote: Fri Jan 26, 2018 12:03 pm
snowman wrote: Fri Jan 26, 2018 11:57 am We did that with our kids. It was more about the financial lesson, not the amount. We opened accounts at TDA and were buying single shares of VTI or VEU when enough funds were available. No minimums, no fees (the accounts have since moved to Vanguard).

I told the kids to keep earnings records in a simple notebook that I checked - date, service performed, to whom, dollar amount. It's what IRS agent told me to do over the phone when I first inquired.
Thanks so much. That's exactly what I was planning to do (a simple record of earnings).

Thanks again!
No problem. Just remember that paying your kids to do chores does not count as earned income. Babysitting (not for siblings) does count, but the wage has to be "reasonable" - i.e. $10/hour, not $50/hour babysitting. If you have business like I did, you can pay them reasonable wages - i.e. I paid them for shredding documents or mailing marketing materials. At that age they didn't work much, and my wages were low, so they were never over $400/year, so no tax filing issues.

I would have recommended TDA for Roth IRA, but they got rid of commission-free Vanguard ETFs couple months ago. Vanguard is now the best place - no minimums, no fees, no commissions. Interface not as nice, but kids don't care, and neither should you. Good luck!
snowman
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Re: ROTH Ira for kids

Post by snowman »

We were never charged any fees. I believe that fee is waived if you elect to receive statements and documents electronically. I would call Vanguard to confirm.
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brother7
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Re: ROTH Ira for kids

Post by brother7 »

Recently, I discovered that Fidelity has a special Roth IRA for kids. Check it out.
Roth IRA for Kids
dekecarver
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Re: ROTH Ira for kids

Post by dekecarver »

Just a thought, why not take the kids money, let them pick a stock or fund to buy and you buy it in your IRA while keeping a record of the purchase as theirs and make them the beneficiary of the IRA? Or track and give them the equivalent $ of what was earned or lost while in your account to open their own Roth when older. They could still learn and see how the system works under this model. Just seems easier to me but I may be missing something.
Yukon
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Re: ROTH Ira for kids

Post by Yukon »

dekecarver wrote: Sat Jan 27, 2018 4:54 am Just a thought, why not take the kids money, let them pick a stock or fund to buy and you buy it in your IRA while keeping a record of the purchase as theirs and make them the beneficiary of the IRA? Or track and give them the equivalent $ of what was earned or lost while in your account to open their own Roth when older. They could still learn and see how the system works under this model. Just seems easier to me but I may be missing something.
I think you may be underestimating the advantage of compound interest and drain on taxes in a RMD or beneficiary scenario.
Having a 10 year old invest $400 every year into a ROTH for 70 years @ 8% would be worth $1,262,517.15.
Don't Work Forever.
snowman
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Re: ROTH Ira for kids

Post by snowman »

dekecarver wrote: Sat Jan 27, 2018 4:54 am Just a thought, why not take the kids money, let them pick a stock or fund to buy and you buy it in your IRA while keeping a record of the purchase as theirs and make them the beneficiary of the IRA? Or track and give them the equivalent $ of what was earned or lost while in your account to open their own Roth when older. They could still learn and see how the system works under this model. Just seems easier to me but I may be missing something.
Maybe, but what you describe seems way more complicated than what we did, or what OP wants to do.

You go to Vanguard website, and in 5 minutes you open Minor Roth IRA account. There is no fee, one time or ongoing, to do it and keep it open.

You then setup ACH with yours or kid's bank account - takes 2 minutes. Next day you verify 2 tiny deposits by the bank, and your ACH is done.

Now the kid is good to go for the rest of his/her life! No tracking, no transfers, no "who's money is this", no future tax issues. Very simple and effective. They buy VTI or VXUS for free when they have enough money. I cannot imagine process any simpler than that. The money is theirs, tax free, for the rest of their lives. And they appreciate it so much more because they earned it - it wasn't given to them by their parents. The lesson was very powerful for both of my kids!
dekecarver
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Re: ROTH Ira for kids

Post by dekecarver »

snowman wrote: Sat Jan 27, 2018 8:59 am
dekecarver wrote: Sat Jan 27, 2018 4:54 am Just a thought, why not take the kids money, let them pick a stock or fund to buy and you buy it in your IRA while keeping a record of the purchase as theirs and make them the beneficiary of the IRA? Or track and give them the equivalent $ of what was earned or lost while in your account to open their own Roth when older. They could still learn and see how the system works under this model. Just seems easier to me but I may be missing something.
Maybe, but what you describe seems way more complicated than what we did, or what OP wants to do.

You go to Vanguard website, and in 5 minutes you open Minor Roth IRA account. There is no fee, one time or ongoing, to do it and keep it open.

You then setup ACH with yours or kid's bank account - takes 2 minutes. Next day you verify 2 tiny deposits by the bank, and your ACH is done.

Now the kid is good to go for the rest of his/her life! No tracking, no transfers, no "who's money is this", no future tax issues. Very simple and effective. They buy VTI or VXUS for free when they have enough money. I cannot imagine process any simpler than that. The money is theirs, tax free, for the rest of their lives. And they appreciate it so much more because they earned it - it wasn't given to them by their parents. The lesson was very powerful for both of my kids!
So for kids who earn more than $400 you would need to file taxes for them per this information from another website: That being said, if your child’s earned income came from self-employment (like babysitting), they will still have to pay self-employment tax. If their net earnings were $400 or more, they will have to file Schedule SE to calculate the self-employment tax owed and, unfortunately, they will have to file the 1040 instead of the 1040EZ.

Is that correct?
snowman
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Re: ROTH Ira for kids

Post by snowman »

I think so, but I am not an accountant and don't want to give bad advice. I am sure Spirit Rider will provide correct answer.

At a time, I had a CPA doing my business taxes (S-Corp), and I did our personal taxes. I remember asking him about the rules when it came to kid's income, and I followed his advise.
Spirit Rider
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Re: ROTH Ira for kids

Post by Spirit Rider »

dekecarver wrote: Sat Jan 27, 2018 3:05 pm So for kids who earn more than $400 you would need to file taxes for them per this information from another website: That being said, if your child’s earned income came from self-employment (like babysitting), they will still have to pay self-employment tax. If their net earnings were $400 or more, they will have to file Schedule SE to calculate the self-employment tax owed and, unfortunately, they will have to file the 1040 instead of the 1040EZ.

Is that correct?
No, did you not see my previous post Re: Roth IRA for kids and you should refer to Publication 926 Household Employer's Tax Guide

Babysitters, other mother's helpers (cooking, cleaning, laundry, etc...), yard work (lawn work, painting, show removal, etc...), etc... are "Household Help" when working for neighbors and should not file as self-employed. They can earn thousands before any need to pay the employee share of FICA (7.65%), let alone SE tax (15.3%), require income tax withholding and filing a tax return.

Now if you have a budding landscaping entrepreneur with many clients and significant business income/business expenses to deduct then fine, have them a start a real business and file as self-employed.

Otherwise, the right way to do it and always better way for the kids is for them to be classified as household help. The vast majority of the employers will not have to report anything, some might have to spend $5 to do an online W-2 and very few might actually have to run payroll.
dekecarver
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Re: ROTH Ira for kids

Post by dekecarver »

Thanks for the follow up reply, very helpful.
General
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Re: ROTH Ira for kids

Post by General »

We have a small magazine company and we started putting our then 5 year old son in the magazine. We decided to make him an employee (child model) and we opened him up a savings acoount to transfer his pay checks to and we opened him a Roth for minor at Fidelity. We also file a tax return for him and pay his taxes monthly when he gets his paycheck through the EFTPS site. Kids can make a lot of money in the modeling world so we can eassily pay him $200 per month and we put all of it into his Roth. In Texas, the kid gains full control of the Roth at age 18 (check your state) so it will be important to teach good money habits. If all goes well, with very little effort, he will be finically set for life. Its a great legacy to leave your kids so if you have the opportunity, I would encourage you to do it. I would also keep a record of all payments and make the payments typical pay rates for what a kid would typically get payed to do those certain jobs.
Spirit Rider
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Re: ROTH Ira for kids

Post by Spirit Rider »

There is no reason to withhold any tax
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Re: ROTH Ira for kids

Post by Spirit Rider »

There is no reason to withhold any taxes if his income < the standard deduction and then there would be no reason to file a return. The W-2 would suffice to document the income for Roth IRA contribution purposes.

If the magazine company is a sole proprietorship or a partnership with a/the parent(s) as only partner(s), there would be no FICA or FUTA required on $200/month.
MarkNYC
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Re: ROTH Ira for kids

Post by MarkNYC »

Spirit Rider wrote: Fri Jan 26, 2018 3:02 pm
Children must file their own return if they have any earned income. The parents can only elect to file their children's unearned income on their return if there is no earned income and the unearned income < $10,500.
The rules for filing Form 8814 are more restrictive than this. Parents can elect to report the child's unearned income on the parents' tax return only if all of the child's unearned income falls into one of three categories: interest, dividends, or capital gain distributions. If the child has any other type of unearned income then the parents cannot make the election. Examples of other types of unearned income would include IRA, pension and annuity income, rents, royalties, SS, taxable scholarships, and gains (or losses) from the sale or redemption of securities. The last one is probably the most common.
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brother7
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Re: ROTH Ira for kids

Post by brother7 »

MarkNYC wrote: Sun Jan 28, 2018 9:24 pm
Spirit Rider wrote: Fri Jan 26, 2018 3:02 pm
Children must file their own return if they have any earned income. The parents can only elect to file their children's unearned income on their return if there is no earned income and the unearned income < $10,500.
The rules for filing Form 8814 are more restrictive than this. Parents can elect to report the child's unearned income on the parents' tax return only if all of the child's unearned income falls into one of three categories: interest, dividends, or capital gain distributions. If the child has any other type of unearned income then the parents cannot make the election. Examples of other types of unearned income would include IRA, pension and annuity income, rents, royalties, SS, taxable scholarships, and gains (or losses) from the sale or redemption of securities. The last one is probably the most common.
If a child has capital gains (or losses) from the sale of securities, Form 8814 is no longer an option, correct?

Related question...
If the child has capital gains (or losses) from the sale of securities, is the child REQUIRED to file a tax return or do the minimum filing requirements for dependents apply?
MarkNYC
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Re: ROTH Ira for kids

Post by MarkNYC »

brother7 wrote: Sun Jan 28, 2018 10:16 pm
MarkNYC wrote: Sun Jan 28, 2018 9:24 pm
Spirit Rider wrote: Fri Jan 26, 2018 3:02 pm
Children must file their own return if they have any earned income. The parents can only elect to file their children's unearned income on their return if there is no earned income and the unearned income < $10,500.
The rules for filing Form 8814 are more restrictive than this. Parents can elect to report the child's unearned income on the parents' tax return only if all of the child's unearned income falls into one of three categories: interest, dividends, or capital gain distributions. If the child has any other type of unearned income then the parents cannot make the election. Examples of other types of unearned income would include IRA, pension and annuity income, rents, royalties, SS, taxable scholarships, and gains (or losses) from the sale or redemption of securities. The last one is probably the most common.
If a child has capital gains (or losses) from the sale of securities, Form 8814 is no longer an option, correct?

Related question...
If the child has capital gains (or losses) from the sale of securities, is the child REQUIRED to file a tax return or do the minimum filing requirements for dependents apply?
Form 8814 is not an option if the child has gains or losses from security sales.

When determining the minimum filing requirements of a dependent child, the IRS will consider the entire gross sales proceeds to be a 100% short-term gain unless a child tax return is filed to report the actual gain or loss.
pshonore
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Re: ROTH Ira for kids

Post by pshonore »

Is Form 8814 still an option after tax year 2017? If the "kiddie tax" switches to trust rates, does it still work?
aristotelian
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Re: ROTH Ira for kids

Post by aristotelian »

This may be overkill, but if the kid is old enough to actually earn income, they are old enough to use a computer. My 11 year old is old enough to do jobs but unfortunately shows no interest in earning money, but he is very computer savvy. When he is ready, I will encourage him to invoice his customers and set up a spreadsheet to get the full experience of operating a business.
MarkNYC
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Re: ROTH Ira for kids

Post by MarkNYC »

pshonore wrote: Mon Jan 29, 2018 8:54 am Is Form 8814 still an option after tax year 2017? If the "kiddie tax" switches to trust rates, does it still work?
Good question. I haven't read anything about it, but my guess would be that the Form 8814 will continue. I think most 8814s report income in the range of $1,500 - $4,000, so the Form's continuance should result in an insignificant loss of revenue to the IRS, while continuing to reduce the number of separate tax returns that the IRS must process.
General
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Re: ROTH Ira for kids

Post by General »

Spirit Rider wrote: Sun Jan 28, 2018 11:43 am There is no reason to withhold any taxes if his income < the standard deduction and then there would be no reason to file a return. The W-2 would suffice to document the income for Roth IRA contribution purposes.

If the magazine company is a sole proprietorship or a partnership with a/the parent(s) as only partner(s), there would be no FICA or FUTA required on $200/month.
Thank you Spirit Rider - The magazine company is a C-Corp but that was good to know.
Braje
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Re: ROTH Ira for kids

Post by Braje »

thangngo wrote: Fri Jan 26, 2018 1:50 pm
pshonore wrote: Fri Jan 26, 2018 1:31 pm
thangngo wrote: Fri Jan 26, 2018 12:22 pm
pshonore wrote: Fri Jan 26, 2018 12:09 pm Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
Except that those kids are on their parents' return.
And where on their parent's return do kids put their earned income?
That's for their parents to figure it out, not the kids.
If the child has income they file the own tax forms, but are a dependent on their parents return.
TravelforFun
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Re: ROTH Ira for kids

Post by TravelforFun »

pshonore wrote: Fri Jan 26, 2018 1:31 pm
thangngo wrote: Fri Jan 26, 2018 12:22 pm
pshonore wrote: Fri Jan 26, 2018 12:09 pm Some folks disagree but I believe anyone doing a Roth should file a tax return. And if a self-employed person earns more than $400, SS tax is due with the return
Except that those kids are on their parents' return.
And where on their parent's return do kids put their earned income?
My gradson does work for me when he has time and I issue him a 1099 MISC every year, and he has to file tax return and pay his self employment tax. Of course, I deposit into his Roth account an amount that matches his income.

TravelforFun
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newbie003
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Re: ROTH Ira for kids

Post by newbie003 »

I apologize, as it might be mentioned in this thread, but let's say my son shovels the neighbors driveways and does some small work for my company (well under $600 so no 1099), and earns $100 in total for the year. How/where does he report that on a tax return?

For example, for 2017, he had $62 of income from these odd jobs, and he contributed all $62 of that into a ROTH IRA. Where do I put the income? It's not W2, it's not 1099 Misc, etc... Without entering the income, H&R Block says he can contribute $0 into a ROTH.

Thanks in advance.
Spirit Rider
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Re: ROTH Ira for kids

Post by Spirit Rider »

The work for the neighbor is household help wages, but below the FICA or FUTA limits and the $600 limit for W-2 reporting.

If the company is a sole proprietorship owned by you or a partnership of just you and your spouse, your children < 18 are not subject to FICA and < 21 are not subject to FICA. Combined with wages < $600 no W-2 reporting required.

However, if the above is not true, FICA should have been deducted/paid and reported on a W-2 and FUTA paid. This would be true it was only a small amount like $20.

Roth IRA contributions are not reported on your tax return unless you are claiming the Saver's Credit. Otherwise H&R Block is just having you enter the Roth contribution to validate you have enough compensation.

However, you do not need H&R Block's OK. If you have the compensation, make the contribution. If no W-2 reporting required, just keep records of paid wages. There would be no tax return required because it is well below the filing requirement.
Wash.Invest
Posts: 699
Joined: Sat Jun 13, 2009 1:25 am

Re: ROTH Ira for kids

Post by Wash.Invest »

brother7 wrote: Sun Jan 28, 2018 10:16 pm ...
If a child has capital gains (or losses) from the sale of securities, Form 8814 is no longer an option, correct?

Related question...
If the child has capital gains (or losses) from the sale of securities, is the child REQUIRED to file a tax return or do the minimum filing requirements for dependents apply?
The kids, 'personal' investment activities seldom triggered minimum taxable event (but sometimes they had to file)

Thus... another GREAT reason to have child's investments in a 'qualified' account.

We used Roths (From ~ age 12)

big benefit = FAFSA did not touch / consider their Roth IRAs (as available funds for college loan qualification) :sharebeer (Maybe that has changed... I was surprised the Roth asset was not aggregated into 'expected contribution'.

As per above... I matched all their 'wages' / earned income to put into their Roths. (up until age 18, when the kids were Gone :arrow: )
Terri-bh
Posts: 36
Joined: Thu Jan 04, 2018 1:41 pm

Re: ROTH Ira for kids

Post by Terri-bh »

Hi. Bringing this thread to the top since it seems most appropriate to ask in....


I'm looking into opening accounts for my (minor) kids of the following:

Kid #1: Minor Roth IRA, regular stock account and a 529.
Other kids: Regular stock account, 529, and in the future, Minor Roth IRAs


We (the parents) currently have our stock account at TD Ameritrade plus a Coverdell for Kid #1 (I thought I was opening a 529 with Scottrade, but they didn't actually have that, and it ended up being a coverdell, but then Scottrade merged with TDA).

I'm at a point of frustration right now with the fact that I can't download the forms I need easily/reliably (it wants to prepopulate the forms, then says it can't, then sends me email with forms that may or may not be the right ones). I also don't really like the TD Ameritrade interface as much as Scottrade's, and I'm thinking maybe I should evaluate other options.

The benefit of TDA is that I'm familiar enough with the interface, and it appears that you can link accounts so that you only need one login to access the kids accounts (or maybe one login per kid??). I definitely would like to keep things simple in this respect. I'm not sure if I should be worried about fees--likelihood is that we'd only transfer money once or twice a year, but kid #1 is getting regular (but small) paychecks, so maybe it should be a consideration. Kids #2/3 would make $200 around Christmastime at holiday fairs and put it in one lump-sum. I have no problem covering a couple of $7 fees once a year if it keeps my life simple.

Anyways, I noticed two other accounts mentioned Fidelity and Vanguard.
1. Do Fidelity and/or Vanguard have the ability to access multiple types accounts from one login?
2. Will TDA actually let me pile these accounts into one login? One login per kid is fine, but I sure as heck don't want 9 different account numbers going), or does opening accounts for Minors make it such that they can't be added to one account--has anyone done this already?
Topic Author
newbie003
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Joined: Thu Feb 02, 2017 9:25 am

Re: ROTH Ira for kids

Post by newbie003 »

Personally I love E*trade. I think it's a much better interface than TD. It easily links/shows all accounts under one login.
snowman
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Joined: Thu Jan 31, 2013 11:59 am

Re: ROTH Ira for kids

Post by snowman »

TDA allows multiple accounts with a single login, I have had it set up like that for many years with no problem. I used TDA because it was the only firm with free Vanguard ETF trades. We no longer have accounts at TDA - I moved kids' minor Roth IRA accounts to Vanguard, and ours to ME for a very nice bonus.

Vanguard's setup for minor Roth IRA is better but slightly different. It's better in that you now have free ETF trades, vs. paying TDA commission fees. It's different in that Vanguard requires that there are 2 separate logins per minor account - one for you, the custodian, and one for the kid. Only the custodian - you - will have the option to contribute, withdraw, or trade on this account. Your kids can login under their credentials, and they will see their holdings, check performance etc. but money transfers and trading functions will be disabled. I think it's actually pretty clever the way they do it.

So to answer your question about logins - yes, you can have single login at Vanguard if you are listed as custodian for all kids. With your login, you can see, and contribute/trade, in all 3 minor accounts, plus your own if you have one. But then each kid will have their own login, and they will only be able to see their account, not their sibling's.

I don't know how Fidelity handles logins for minor Roth IRAs.

Based on my experience, Vanguard (as of today) is the way to go.
Terri-bh
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Joined: Thu Jan 04, 2018 1:41 pm

Re: ROTH Ira for kids

Post by Terri-bh »

Newbie, thanks for the suggestion on Etrade. Had forgotten about them.

Snowman: That's very helpful! Looks like Vanguard has a 529 as well.... Plus donor advised fund....... That would be a real winner if I could get it all into one place.
Terri-bh
Posts: 36
Joined: Thu Jan 04, 2018 1:41 pm

Re: ROTH Ira for kids

Post by Terri-bh »

Any downsides that I should know about regarding Vanguard?
snowman
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Joined: Thu Jan 31, 2013 11:59 am

Re: ROTH Ira for kids

Post by snowman »

Terri-bh wrote: Mon Dec 10, 2018 2:51 pm Any downsides that I should know about regarding Vanguard?
As far as what exactly?
Topic Author
newbie003
Posts: 687
Joined: Thu Feb 02, 2017 9:25 am

Re: ROTH Ira for kids

Post by newbie003 »

My pleasure. ETrade also has plenty of no commission ETFs and some mutual funds with no minimum investment (SWTSX for example).
Terri-bh
Posts: 36
Joined: Thu Jan 04, 2018 1:41 pm

Re: ROTH Ira for kids

Post by Terri-bh »

snowman wrote: Mon Dec 10, 2018 2:53 pm
Terri-bh wrote: Mon Dec 10, 2018 2:51 pm Any downsides that I should know about regarding Vanguard?
As far as what exactly?
Anything you've found frustrating with them?
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