No. of Recommendations: 0
Greetings, Priced, and welcome. You wrote:

<<A relative gave our 1-year-old daughter a big check for Christmas, with the wish that we open a ROTH IRA for her... It's my understanding that to contribute to a ROTH IRA she must have "earned income". While that can preety much be explained away by "posing for pictures" or some other such nonsense as far as the IRS is concerned, I'm frustrated by the fact that since the check was for more than $400 my daughter would be technically obliged to pay self-employment tax on her "earnings".

I'm wondering if all this extra paperwork is really worth it for a 1-year old who won't see this money for 60 years (except for the educational-use exception). There's a limit to how much hassle I will go through just to legally avoid taxes... although this money *could* grow very fast unencumbered by taxes.

What do other FOOLs think?>>

I think it's not the smartest thing in the world to try and mess with the IRS. A gift is not earned compensation. I think it's very foolish (small "f" intended) to try and fudge the rules. Additionally, an IRS examiner may even decide it's a form of tax fraud. Do you really want that kind of grief?

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.