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May 30, 2019
As a tax professional who has also been a mom for 9 years, I found myself constantly looking for ways to maximize financial benefits for my kids. Here are some points for all the parents out there who want to do the same:
If you have a child who is going to take a summer job this year, you could contribute up to $6,000 but no more than his or her total earnings to a Roth IRA account. The contribution will be considered as a gift. As long as you are not giving more than $15,000 ($30,000 if married) to each child, the contributions will not become taxable for you. April 15, 2020 is the deadline for making such contributions. The arrangement even has advantages into the future. For example, the first $10,000 of earning in the Roth IRA account can be taken out tax-free when they are ready to buy a house.
This will be the time that I put my “mom hat” on and give them a little advance in life. If he or she is starting a job now, let them know that part-year withholding is a viable option. Just discuss the possibility with the employer. The little boost in the paychecks can be used to buy a beer with friends or pay down student loans.
For your not-yet-graduated babies who are only working during the summer when school is out, federal income-tax withholding can be exempted if they owed nothing for 2018. The exemption is generally not allowed for kids who are claimed as dependents due to the income limitations. If he or she is kind enough to work for you during the summer, federal unemployment tax is not owed if you have a sole proprietorship or a husband and wife partnership until they turn 21.
Please always feel free to setup an appointment and come talk to us about your options. To read more on your own, here are some good articles:
What to Know About Part-Year Tax Withholding
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