Is it an option to establish a Roth IRA for your children? Yes, it’s possible and a great tax planning option for your children thanks to the several years of tax-free growth they will generate. And thanks to compounded returns, your children’s money will grow faster because it’s growing without tax.
So how is this done? Two words: bonafide services. In this video, we’ll explain how you can establish a Roth IRA for your children.
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About IRA Financial:
IRA Financial Group was founded by Adam Bergman, a former tax and ERISA attorney who worked at some of the largest law firms. During his years of practice, he noticed that many of his clients were not even aware that they can use an IRA or 401(K) plan to make alternative asset investments, such as real estate. He created IRA Financial to help educate retirement account holders about the benefits of self-directed retirement plan solutions.
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Roth proponents always compare $100 in a Roth to $100 in a traditional IRA or 401K, however you can’t compare equal amounts because that $100 after tax in a Roth would equate to $125-145 in a pre-tax IRA/401K when factoring the postponement of both federal and state income taxes.
Do you think its too questionable for me to pay my 3 yr old say $500 or so for using her photograph in my marketing of my business? Its a real estate related LLC. Thanks.
What is the highest $ amount you have seen in a Roth IRA account?
1.5x speed let’s go
So if your child is mowing lawn, in order to show earned income, say $1200 for the summer, yes they won't owe any Federal taxes on that amount BUT they now have to pay FICA, about 15.3% then file a tax return. In addition, now that they are considered a sole proprietor, wouldn't we as parents LOSE THE ABILITY to deduct them as a dependent on our taxes?? If so, then it's not worth it…paying SS & medicare PLUS losing them as a dependent. Is this correct??
Thank you. Very thorough. So my 10 year doesn’t need to file a tax return if his income is under $12k. Got it.
If he gets paid as a sole proprietor for a lemonade stand or yard work for neighbors…we track using a spreadsheet, however how does the IRS know that he has earned income? What steps do I take to set him up as a sole proprietor? Or is it better I become a sole proprietor, as you suggest?
In other words I would like to do the minimal possible, however the income part is a bit confusing.
Thanks again
Thank you….this is the details I was looking for. Question: my neighbor pays my 12 year old for tutoring their 6 years old with homework and babysitting. Do they have to claim their payment as child care services on their tax return? They don't have biz so won't issue a w2, how can I prove to the IRS the money is earned income?…
…ok read from your other reply that w2 isn't needed just logs proving it happened is good enough. Thanks so much!
Can you or a relative pay your kids for babysitting to acquire earned income, and use that money to open up and fund a roth for them and then could I still claim them as dependents and receive my usual child dependent tax credits if they each make less than 5k per year?
…and you have the kid keep receipts for mowing lawns. Good practice, lol! Also be sure to check with child labor laws in your state. Some states can get pretty complicated with that sort of thing. Can a kid do lawn mowing jobs directly with no LLC/S-Corp? (Would asset protection even be worth the extra complexity if a kid doesn't have any assets?)
Can I provide my sisters funds to contribute to her Roth IRA?
What are the parental gift implications in putting money in child’s account until they Can start adding money into their Roth from jobs?