ROTH eligibility question

[karen1972]

HI,

Just to confirm my understanding.

A) Earned income: ie I made $875 by working early voting, was employed by a staffing agency and will receive a tax form.

My understanding is taxes/SS/etc that was taken out can be treated like it is paid from other money thus I can contribute the full $875 correct?

B) Hobby/Misc income: income I didn't receive any tax form for doesn't seem to be treated the same and was not recognized as "earned income". So same day voting I won't receive any forms for as it was a lump sum of $145. I also have other random income from taking surveys and such, usually like $60 from Bing, $150 from Swagbucks, which are paid out in paypal or gift cards. My understanding is that I can't put any of that money into a ROTH IRA.

 

[gwraigty]

"Compensation. Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments."

https://www.irs.gov/publications/p590a#en_US_2017_publink1000230983

Bolding mine.

A) Yes, it's wages, not net income that counts.

B) I'd think your Hobby/Misc income might qualify as self-employment income for this purpose.

 

[SecondCor521]

gwraigty is correct on item #1.

On item #2:

If you report that income as miscellaneous hobby income on line 21, then no, you will not be able to use that income as earned income for the purposes of contributing to an IRA.

If you report that income as self-employment income on a Schedule C (or Schedule C-EZ) and then line 12, then yes, you will be able to use that income as earned income for the purposes of contributing to an IRA. If you choose this route, there are a few other implications: you will have to pay self-employment taxes of 15.3% of your income, you will be able to deduct any business expenses against the income, and you'll be able to take a self-employment tax deduction of half of your self-employment taxes on line 27.

There are published IRS criteria for determining if income is miscellaneous hobby income or self-employment income that I would recommend you review in order to determine how to report the income.

 

[karen1972]

On item #2:



There are published IRS criteria for determining if income is miscellaneous hobby income or self-employment income that I would recommend you review in order to determine how to report the income.

Thanks, I know from reading up from previous tax filings, the swagbucks, etc are to be treated as hobby income in my circumstance. This aligns with my understanding of the tax code and that it wasn't eligible but could always hope I was wrong.

I'll have to look further into the same day voting income.