Guest cushmanw Posted February 5, 2001 Posted February 5, 2001 I have a sixteen year old who wants to start a Roth Account. I have been told that he has to earn $2,000 in taxable income in order to do so. When he works he usually completes the W-2 saying he's exempt so that taxes are not taken out. Could someone clarify for me.
Mary Kay Foss Posted February 6, 2001 Posted February 6, 2001 Anyone contributing to a Roth IRA needs to have earned income not just taxable income and $2,000 is needed to make the maximum Roth contribution. How the W-4 is completed isn't really relevent. The fact that there is a job where he's asked to complete a W-4 indicates that he probably has earned income. There are maximum AGI levels that preclude making contributions but I'm assuming that they don't apply. Mary Kay Foss CPA
Guest cushmanw Posted February 6, 2001 Posted February 6, 2001 Thanks for your response. I guess my next question would be ... does he have to have a certain level of earned income? My husband is telling me that when he fills out the W-2 form he should complete it in such a way that he is charged tax. Then when we file his income tax return he'll get it all back but it establishes income. Is that really important?
alanm Posted February 6, 2001 Posted February 6, 2001 no that is not really important. A w2 is sufficient.
Guest cushmanw Posted February 6, 2001 Posted February 6, 2001 Since he's sixteen do I have to open an account for him as his custodian. Or can he open it himself. Is there any recommendations about how to go about doing that for him. Someone told me Vanguard has a program for young people.
alanm Posted February 6, 2001 Posted February 6, 2001 The IRA application must be a UMGA IRA account with the guardian signing the application until he is 18.
Guest AFRICA6796 Posted February 9, 2001 Posted February 9, 2001 Actually, age 18 or 21, depending on the age of majority in the state of residence. Some custodians refer to such accounts as 'Custodian or Guardian Roth IRAs.'
John G Posted February 13, 2001 Posted February 13, 2001 First off, good forward thinking. A Roth will accumulate a small fortune if started very early and left to compound. Not every potential custodian will accept an IRA for a minor child. For example, last time I checked Etrade said no. But, Schwab does. You need to ask around. W2 payroll income clearly is earned income, but so is paper routes and babysitting if declared. Taxes are not the issue , earned income is. Good luck. Hopefully your child will also learn something about investing.
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