Can I contribute $6000/year in my kids Roth IRA, provided they don't have earned income?

[taxInfoSeeker]

Hi,

I've two school going kids age 5 and 11, both are non-US citizens and have ITINs.

I recently opened Roth-ira for them and would like to understand if I can contribute $6000 from my after-tax income every year for each one of them?

Do they need to have any income in the year to contribute to Roth IRA or they are good if 100% contribution every year is done by me (father) itself?

Thanks in advance.

[Critter]

NO...the kids must have their own earned income to make contributions to their IRA. You cannot use your earned income to fund their IRAs.

[taxInfoSeeker]

Thank you, I was just referring here: https://www.fool.com/retirement/2018/08/05/can-you-open-a-roth-ira-for-your-kids.aspx It's because of the language I was a little bit confused that if I can invest for them, but it's clear now.

[macuser_22]

You misunderstood.    Unless the child has taxable compensation (money that the child worked for reported on a W-2 or was self-employed income) as much as the contribution then it is an excess contribution subject to a penalty that repeats every year until the money is removed.

A parent can establish a custodial brokerage, savings, or other account type for a child but NOT an IRA.   A parent can only contribute to an IRA if it is the parents own IRA in the parents name.   An IRA kin a child's name with the child's SSN can only be funded from the child's own earned income.

The maximum IRA contributions for 2019 is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year which ever is less.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).

(The "your" refers to the IRA owner)

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

[macuser_22]

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@taxInfoSeeker wrote:

Thank you, I was just referring here: https://www.fool.com/retirement/2018/08/05/can-you-open-a-roth-ira-for-your-kids.aspx It's because of the language I was a little bit confused that if I can invest for them, but it's clear now.

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That article is misleading but buried in it, it says:  " ...in other words, as long as your child has enough earned income to justify it,..."