I have been gone for a few days, attending a legal education seminar on individual income taxes. (Short of necessary legal education credits and packing them in for the year). The speaker was a CPA by the name of Sharon Scott. She frequently gives tax seminars to CPAs and lawyers.
She spent some time talking about establishing IRAs for kids. She pushes the limits far more than anything we talked about in our prior discussions. http://early-retirement.org/forums/index.php?topic=2966.0
She said that several years ago she hired her one year old grandson to pose with her on her Christmas card. She paid him a couple thousand bucks-- which she put into an IRA for him. She paid enough extra to cover the necessary self employment tax for her grandson. (He was not hired by his parents so for sure self employment tax was due). Because this was not a business expense on her part, she took no deduction.
She was audited by social security. Their concern was that she was making up income. She proved she paid him the money and audit was over.
Interesting stuff. She said she recommends to her clients that they hire their kids as independent contractors to mow the lawn, etc. and then contribute to an IRA. The amount paid is kept to less than what is necessary for the kid to have to pay income taxes and she claims no self employment tax is due if the parent hires the kid.
I'm not sure I agree with all of her analysis, but it sure was interesting.
She spent some time talking about establishing IRAs for kids. She pushes the limits far more than anything we talked about in our prior discussions. http://early-retirement.org/forums/index.php?topic=2966.0
She said that several years ago she hired her one year old grandson to pose with her on her Christmas card. She paid him a couple thousand bucks-- which she put into an IRA for him. She paid enough extra to cover the necessary self employment tax for her grandson. (He was not hired by his parents so for sure self employment tax was due). Because this was not a business expense on her part, she took no deduction.
She was audited by social security. Their concern was that she was making up income. She proved she paid him the money and audit was over.
Interesting stuff. She said she recommends to her clients that they hire their kids as independent contractors to mow the lawn, etc. and then contribute to an IRA. The amount paid is kept to less than what is necessary for the kid to have to pay income taxes and she claims no self employment tax is due if the parent hires the kid.
I'm not sure I agree with all of her analysis, but it sure was interesting.