Roth IRA - Minor contribution

Forum|Forum|4 years ago
February 17, 2022
3 replies
21 views

A minor earned $2k of income on a W-2. No taxes were withheld, so the minor does not need to file a tax return since they are under the income threshold for both federal and state.

The parents plan to setup and fund a Roth IRA for the minor using the minor's own funds.

Question: Is a tax return required to be filed to "prove" the earned income for the Roth IRA contribution? Or is the W-2 proof enough? I would think the W-2 is enough proof and no return is required but can't seem to find any literature to prove this. Obviously no one will ask for the proof unless there is an audit or an issue down the road...

Thanks for your input!

Lacerte Tax

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Best answer by joantax

The W-2 is proof enough. No worries. The 5498 is sent by the trustee to the IRS to confirm contribution.

qbteachmt

Level 15

You track the contribution as basis.

https://www.irs.gov/taxtopics/tc451

A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it's set up. For more information on Roth IRA contributions, refer to Topic No. 309 and to determine if a distribution from your Roth IRA is taxable, see Is the Distribution From My Roth Account Taxable?

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J

joantaxAnswer

Level 3

The W-2 is proof enough. No worries. The 5498 is sent by the trustee to the IRS to confirm contribution.

qbteachmt

Level 15

"The parents plan to setup and fund a Roth IRA for the minor using the minor's own funds."

This is typical, when a minor works for their parents' business, but often, the parents will fund the IRA account with their own funds, as incentive to the child. The IRS doesn't care where the money funding it will come from.

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