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My husband and I both work overseas. We are exempted from federal taxes uder the "Foreigned Earned Income" does this disqualify us from opening a Roth IRA?

This has been discussed here a couple of times. What it seems to boil down to is that if you don't have Earned Income on your US Federal Tax Return, you can't contribute to an IRA (Roth, Traditional, etc.).

The solution proposed for cases like yours would be to VOLUNTARILY subject $4,000 of your combined income to US tax treatment. Your standard deduction then eliminates the need to pay any taxes and that money can be put into your IRA's ($2,000 each).

There have been some concerns raised about whether or not the IRS would appreciate this particular maneuver. But I don't see the problem since you do have earned income and the IRS isn't collecting any less in taxes as a result. (At least not until you start making withdrawls from the Roth's....)

Talk to your accountant or tax preparer though. I'm no tax lawyer and refuse to be held accountable for repeating what may turn out to be bad advice.

PS: If it does turn out to be good advice, however, you should hurry and make your contributions for last year before April 15, if at all possible. And then add your contributions for 2001 as quickly as you're able.

SactoFool
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