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Level 3

Does contributing to a Roth IRA necessitate filing taxes for a dependent child earning less than 6,200 for 2106?

Both my boys earned income from doing yard work at an investment property and at our main residence.  One also earned money from being a soccer referee (did not receive a W-2).  They both earned > $1,000 and we opened up Roth IRA's for both of them for $600.  Do they have to file a 1040A because of the Roth IRA, and if so, will they have to pay some kind of taxes like self employment taxes?  We use Turbo Tax and couldn't figure this out.

3 Replies
Level 11

Does contributing to a Roth IRA necessitate filing taxes for a dependent child earning less than 6,200 for 2106?

If a person has net earnings over $400 from self-employment, they are required to file a federal income tax return.

Yes, they will likely be required to pay self-employment taxes.  A Roth does not reduce your taxable earnings.

But what your doing is a great idea in building for the future.  I encourage my son's to contribute to a Roth (even do a bit of matching).

https://www.irs.gov/individuals/self-employed

Level 11

Does contributing to a Roth IRA necessitate filing taxes for a dependent child earning less than 6,200 for 2106?

And for the Roth contributions to be valid, they must show earned income, thus requiring the tax returns.
Level 20

Does contributing to a Roth IRA necessitate filing taxes for a dependent child earning less than 6,200 for 2106?

With no W-2 income, because a Roth contribution of $600 requires having net profit from self-employment of more than $600 and net profit of more than $600 requires filing a tax return, a Roth contribution of $600 (which will be reported by the custodian to the IRS on a Form 5498) with no tax return filed implies that either the Roth contribution is an excess contribution or that the individual has under-reported self-employment income that is subject to self-employment taxes.