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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Children and the Roth IRA Date: 6/18/2001 11:29 PM
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Yes, but there is a catch. In order to contribute the full $2000 to the Roth, the child would have to declare at least that amount as self employment income and pay SE tax at 15.3%.

Not really. It pays to learn the rules about the tax treatment of domestic employees' wages. For workers under 18, domestic employment is exempt from FICA and Medicare, but it's good old earned income, reported on line 7 of the 1040, and can be used as the basis for an IRA contribution.

The only time SE tax is involved is when one is actually engaged in a trade or business. I'll agree that the line is not always clear, but you can make some good cases that kids are employees, not independent contractors.

Phil Marti

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