Hi
@hawkmountainYou noted that minor accounts have been opened, but have they been funded yet? I ask, as to avoid all of the theoretical tax "stuff"; to fund the accounts at $399. I note further down this page about record keeping to maintain with the minor accounts paperwork, which will include the receipt of a form
5498 for each minor Roth IRA.
This first paragraph next is the common language found at many web sites. Obviously, opinion; but not legal advice. I'm sure you've seen this, too.
If the wage is paid by you or other family members, just keep records that include the type of work, the date of completion, the employer, and the agreed upon wage. You can include work done around the house provided it is legitimate and the pay is at the going market rate.
Implied with the above from a prior thread note I posted:
"The important thing to remember is that your child must have earned income during the year for which a contribution is made. Money from allowance or investing income does not count as earned income and, therefore, cannot be used towards contributions. Ideally, your child will receive a W-2 for work performed; otherwise, it is a good idea to keep excellent records from jobs that don’t provide a W-2: babysitting, yard work, mothers’ helpers, entrepreneurial endeavors, etc. Your records should include:
Type of work
When the work was done
For whom the work was done
How much your child was paid"
>>>Language from Fidelity custodial minor Roth IRA application form:
Please note that in order to open and contribute to this
account, the minor must have taxable compensation equal to
or greater than the amount of the annual contributions made
to his/her IRA each year. Please review IRS publication 590-A
for a definition of taxable compensation.>>> From a section of the application regarding the minor:
Income Source Industry regulations require us to ask for this information.
Employed: Self-employed: (check one of these)
Occupation Employer Leave blank if self-employed.
Employer Address
City State/Province ZIP/Postal Code Country
Not employed: (this is also an available check box at the end of this section....one may suppose to use this if the above, Employed or Self-employed; are not check, eh? I don't know whether Fidelity would reject the application if one only checked this box for "Not employed", and then indicate the Source of Income, which has a "fill in the box" for your own comment about income source; i.e., yard work. This is very confusing, IMHO.
Source of Income Spouse, etc.
Ed Slott, minor Roth IRA site link
here.
ADD: YouTube a few videos...
https://www.youtube.com/results?search_query=roth+ira+for+minor@msf and his offering of the bankrate.com link is one of the better detailed descriptions I have read regarding the $400 limit.
Lastly, I know all Fidelity IRA's now automatically include the brokerage feature. Is this the case for Vanguard? I ask, as this would allow for the purchase of etf's within the minor Roth accounts; otherwise contributing enough money over the years to attain a minimum for investment in a mutual fund would really throttle back the ability to have the wonderful affect of compounding for these accounts. Example: VTI is about $122/share to purchase and $399 would purchase 3 shares of VTI with $33 remaining to float in a MM account or to purchase another appropriate etf with the $33 balance.
'Course, the guidelines (IRS); versus those who interpret many times have different paths. I do not find any IRS tax court cases related to minor Roth IRA accounts. And part of all of this too, is of course; this "income" is not generated and shown on a W-2 (yet) and that won't be the case until age 16 (child labor law, eh?) and when the minor may have employment that requires a W-2 filing.
I know you are already on "overload" with all of this, but tis a good plan. Keep at it.......
Take care,
Catch
