Joshua's Roth IRA

#1 10-16-2005, 03:00 AM

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

Dick

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#2 10-17-2005, 12:59 AM

"Dick Adams" <rdadams@smart.net> wrote:

Quote:

1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

Sorry, but he doesn't have any "taxable compensation," so he
has no basis for any IRA contribution.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#3 10-17-2005, 12:59 AM

Dick Adams wrote:

Quote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

Without earned income (or "taxable compensation" as defined
in Pub 590) he is not eligible to open or contribute to a
Roth or traditional IRA. SSDI doesn't even come close. With
$9,000 of tax-free income, why would a 14-year old need an
allowance?

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#4 10-17-2005, 12:59 AM

Quote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

No earned income -> No Roth.

--
Don EA in Upstate NY

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#5 10-17-2005, 01:18 AM

Dick Adams wrote:

Quote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

Short answer "no."

Long answer. Only he can open a ROTH IRA if he qualifies.
However, with no earned income, no IRA. And "incentive
payments" for good grades, not being reportable on a 1040
would not otherwise qualify as earned income.

ChEAr$,
Harlan

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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#6 10-17-2005, 01:18 AM

Quote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

No, it doesn't work. Facts 1 & 2 don't matter, and fact 3
kills the idea. To contribute to a Roth IRA (or a
traditional IRA) he has to have taxable compensation for
services, basically either wages or self-employment income.
SSDI doesn't count, nor do allowance, rewards for good
grades, or investment income.

Bob Sandler

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#7 10-17-2005, 01:18 AM

Dick Adams <rdadams@smart.net> wrote:

Quote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

He cannot contribute to a Roth or traditional IRA unless he
has at least that much taxable compensation. Taxable
compensation includes wages, tips, employer bonuses, certain
farm income, self employment income, and alimony, which
we'll assume he has avoided.

You have not listed any taxable compensation so unless he
has some, he cannot contribute to a Roth IRA.

Neither your nor his SSDI counts as taxable compensation.

If you were to pay him a reasonable salary for reasonable
work, and issued him a W-2 form, then he could qualify.
Since a parent paying a minor child is not required to pay
FICA or Medicare, your expenses are much lower too.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#8 10-17-2005, 03:00 AM

Arthur Kamlet wrote:

Quote:

Dick Adams <rdadams@smart.net> wrote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

He cannot contribute to a Roth or traditional IRA unless he
has at least that much taxable compensation. Taxable
compensation includes wages, tips, employer bonuses, certain
farm income, self employment income, and alimony, which
we'll assume he has avoided.

You have not listed any taxable compensation so unless he
has some, he cannot contribute to a Roth IRA.

Neither your nor his SSDI counts as taxable compensation.

If you were to pay him a reasonable salary for reasonable
work, and issued him a W-2 form, then he could qualify.
Since a parent paying a minor child is not required to pay
FICA or Medicare, your expenses are much lower too.

Art, i agree that no income = no Roth, or reg IRA. I'm still
not clear on the self employment aspect of 'errands' and/or
'yard work'. A domestic worker has an income threshold of
$1400 for 2005 before the 'employer' needs to pay (and
withhold FICA). So, say he claims he worked for a number of
neighbors, say 4, each paying him $1000 over the course
of the year. This is nipped from the Social security site;

"I do housework for two of my neighbors. I work one day a
week for each of them. Do I have to pay Social Security tax
on the money they pay me?

If you are a "household worker", your wages are covered by
Social Security if you earn $1,500 in 2006 (it was $1,400
in 2005) or more (including cash for transportation expenses)
during the year from any one employer.

Household workers include babysitters, maids, cooks, laundry
workers, butlers, gardeners, chauffeurs, people who do house
cleaning or repair work, or anyone employed in or around
someone else's home. (This does not apply if you are under age
18 during any part of the year and household work is not your
principal job.) Your employer must deduct your share of the
Social Security taxes from your wages and report your
earnings to the Internal Revenue Service. If the wages aren't
reported, you will not earn Social Security credits for your
work."

Again, I'm still not 100% here. But I read this to mean my
4 x $1000 scenario doesn't require FICA payments, just
reporting on a 1040. And from a prior thread, I understand
he's above the kidde tax threshold, and keep a standard
deduction of "MAX( $800, earned income + XXX ) standard
deduction." (quoted from Rich Carreiro from other thread)

So where would the paper trail be on this scenario? I shoveled
snow for a dozen neighbors when I was a kid. Had I put it all
in a Roth, I'd be sitting pretty.

JOE

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#9 10-18-2005, 08:34 AM

"joetaxpayer" <joetaxpayer@nospam.com> wrote:

Quote:

If you are a "household worker", your wages are covered by
Social Security if you earn $1,500 in 2006 (it was $1,400
in 2005) or more (including cash for transportation expenses)
during the year from any one employer.

<snip>

Quote:

So where would the paper trail be on this scenario? I shoveled
snow for a dozen neighbors when I was a kid. Had I put it all
in a Roth, I'd be sitting pretty.

There are two separate issues here: "earned income" and SS
taxability. They don't have to travel together.

Someone under 18 can perform domestic duties without anyone
having to pay SS tax. It's still taxable compensation and
could be used as the basis for a Roth contribution. You
just report the wages on line 7 of the 1040.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

#10 10-18-2005, 08:53 AM

joetaxpayer <joetaxpayer@nospam.com> wrote:

Quote:

Arthur Kamlet wrote:
Dick Adams <rdadams@smart.net> wrote:

Facts:
1) I am on Social Security Disability Income (SSDI).
2) My 14 year old son, Joshua the Mercenary, receives about
$9,000 a year of SSDI income because I am on SSDI.
3) Joshua has no earned income unless you count allowances
and incentive payments for superior grades.

Does it work for me to open a Roth IRA for him, maximizing
contributions, and minimizing risk?

He cannot contribute to a Roth or traditional IRA unless he
has at least that much taxable compensation. Taxable
compensation includes wages, tips, employer bonuses, certain
farm income, self employment income, and alimony, which
we'll assume he has avoided.

You have not listed any taxable compensation so unless he
has some, he cannot contribute to a Roth IRA.

Neither your nor his SSDI counts as taxable compensation.

If you were to pay him a reasonable salary for reasonable
work, and issued him a W-2 form, then he could qualify.
Since a parent paying a minor child is not required to pay
FICA or Medicare, your expenses are much lower too.

Art, i agree that no income = no Roth, or reg IRA. I'm still
not clear on the self employment aspect of 'errands' and/or
'yard work'. A domestic worker has an income threshold of
$1400 for 2005 before the 'employer' needs to pay (and
withhold FICA). So, say he claims he worked for a number of
neighbors, say 4, each paying him $1000 over the course
of the year. This is nipped from the Social security site;

"I do housework for two of my neighbors. I work one day a
week for each of them. Do I have to pay Social Security tax
on the money they pay me?

If you are a "household worker", your wages are covered by
Social Security if you earn $1,500 in 2006 (it was $1,400
in 2005) or more (including cash for transportation expenses)
during the year from any one employer.

Household workers include babysitters, maids, cooks, laundry
workers, butlers, gardeners, chauffeurs, people who do house
cleaning or repair work, or anyone employed in or around
someone else's home. (This does not apply if you are under age
18 during any part of the year and household work is not your
principal job.) Your employer must deduct your share of the
Social Security taxes from your wages and report your
earnings to the Internal Revenue Service. If the wages aren't
reported, you will not earn Social Security credits for your
work."

Again, I'm still not 100% here. But I read this to mean my
4 x $1000 scenario doesn't require FICA payments, just
reporting on a 1040. And from a prior thread, I understand
he's above the kidde tax threshold, and keep a standard
deduction of "MAX( $800, earned income + XXX ) standard
deduction." (quoted from Rich Carreiro from other thread)

So where would the paper trail be on this scenario? I shoveled
snow for a dozen neighbors when I was a kid. Had I put it all
in a Roth, I'd be sitting pretty.

I was suggesting that nicem bighearted Dad pays Josh $4000
as wages to do work that's worth that much money. Dad is a
CPA so allocating $$ for work done is easy for him:^)

That is not enough to pay any taxes at all. As far as
kiddie tax is concerned, facts as given show Josh is too old
to be called a kiddie. And dads who pay wages to their minor
children need not pay FICA and Medicare for them.

All 4000 gets contributed to a Roth.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

<< ================================================== ===== >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ================================================== ===== >>

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