How to document earned income
If a person makes below the number neccessary to file a tax return how do they document that they have earned income and are eligible for a Roth IRA contribution?
Also, what if that person earns only cash compensation (no witholdings for taxes or social security)?
Thanks,
Permalink Submitted by Alan - IRA critic on Mon, 2014-07-21 17:58
They would just retain any records documenting the earned income. A parent would document allowance paid to a child for chores done by the child when the allowance provides earned income for an IRA contribution. Net earnings from self employment is very limited before a taxpayer has to file Sch SE to pay self employment taxes, but that is possible. While filing a tax return is not a requirement to make a Roth contribution, a max contribution may trigger questions if there is no Sch SE and no W-2.
Permalink Submitted by tomd37 on Mon, 2014-07-21 17:58
What type of “earned income” are you talking about please? A tax return, whether reflecting a tax liability or not, would help substantiate qualifications for contributing to an IRA. All income, whether cash or otherwise, must be reported on a tax return.
Permalink Submitted by tomd37 on Mon, 2014-07-21 18:17
What type of “earned income” are you talking about please? A tax return, whether reflecting a tax liability or not, would help substantiate qualifications for contributing to an IRA. All income, whether cash or otherwise, must be reported on a tax return.