Arthur Kamlet wrote:

- quote -

I thought schedule E was reserved for real estate rentals
and leases -- but I don't remember where equipment leasing
goes. Perhaps "miscellaneous income", with expenses going
into "miscellaneous adjustments to income"?

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Stuart Bronstein wrote:
- quote -

I feel a pun coming on!

Now Stu, that would be what IRS considers a sham transaction.

"Sham" on you! (grin

ChEAr$,
Harlan Lunsford

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- quote -

Very odd.

There are 24 occurrences of taxable compensation in IRS Pub
590 including

Page 3

Traditional IRA contribution and deduction limit. Unless you
reached age 50 before 2004, the most that can be contributed
to your traditional IRA for 2003 is the smaller of the
following amounts:

$3,000, or
Your taxable compensation for the year.

==== ==== ====

And yet when it comes to a definition of taxable
compensation for 2003, they change it to plain vanilla
Compensation.

Yet all the compensation items on Page 8 are examples of
taxable compensation, so I have no idea why they do not
include Taxable on page 8.

- quote -

I'll not comment on the legality of doing this, but this
seems to be Schedule E income which is not taxable
compensation.

You could hire the kid as an employee provided he does he
work of an employee, and gets a fair wage, and avoid paying
SE tax for the under 18 yr old child, and give him taxable
compensation.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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- quote -

Agree, and when such a client comes to me when I'm wearing
my paid preparer hat, I do make much more detailed
inquiries.

The general approach to VITA however, is to try to validate
Name/SSN and to transfer 1099 and W-2 info correctly. We are
not to probe too deeply.

I'm not sure how much VITA work you've been doing,
expecially in urban settings, but when a VITA client hands
you a few social security cards and all the names of the
parents and kids are very different, and they have to refer
to a handwritten sheet to get the birthdates of everyone,
well, that's suspicious, but when I ask this of our IRS
contacts they say we can only work with what we are given.

And VITA is handled via the IRS SPEC folks who are measured
on how many VITA clients we help, and do not answer
tax-related questions. kids,

- quote -

I think the majority of my VITA clients are honest
low-income taxpayers who need help preparing their taxes.
But I recognize there are those who might not be entirely up
front and I just work with what I have. Due diligence, to
my knowledge, is not part of the VITA student or instructors
manual.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Arthur Kamlet wrote:

- quote -

I checked the publication quickly but didn't see the
definition for taxable compensation.

If it's taxable compensation rather than earned income, my
thought was that a parent with a Schedule C business can
give equipment to his child and then lease it back. That
could give the kid taxable compensation for this purpose.
Or could it?

Stu

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Harlan Lunsford wrote:
- quote -

I volunteer my time and have turned away individuals who I
believed were reporting phantom SE income to obtain the
EITC. I usually discover this when I ask questions about
ordinary and necessary business expenses and costs of goods
sold.

--
Alan
http://taxtopics.net

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"Stuart
Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

Yes. Unearned income is not considered for ANY IRA contribution.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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wrote:

- quote -

It has to be "taxable compensation." This includes wages, tips,
bonuses, severance pay, net self-employment income, and alimony.

See IRS Pub 590 for "taxable compenation."

--

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Gary Goodman wrote:

- quote -

That income would also earn Social Security credit. But, if
the income is fabricated or falsely stated, these people
could end up in big trouble under Social Security rules.

MTW

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Stuart Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

Basically, yes, with notable exceptions for alimony, self
employment income and commissions anything shown in Box 1 of
your W-2 is "taxable compensation" for IRA contributions.

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Arthur Kamlet wrote:
- quote -

As a paid preparer we are bound to make reasonable inquries
in a case like this to determine a bona fide schedule c
business.

However a volunteer who does it for free presumably is not
under such compunction.

Or is he?

Or should he be?

What would YOU do? (question for everybody.)

ChEAr$,
Harlan Lunsford, EA n LA

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Stuart Bronstein wrote:
- quote -

The actual $$$ used to make the ROTH IRA contribution need
not BE earned, but the contributor must HAVE earned income
of necessary amounts to be able to make it.

A grandparents wants grandchild to start a ROTH, but all the
kid earned during the summer went for his own "necessities"
(you can fill in your own blanks here; car, girl, etc). So
before April 15th next year grandparent determines amount
kid earned (say 1600$) and gives the kids same amount,
making sure that kid opens the IRA.

ChEAr$,
Harlan Lunsford, EA n LA

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- quote -

Earned from EMPLOYMENT - YES!!!

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Gary Goodman <XgaryX[at]garyg7.com> wrote:
- quote -

I do a fair amount of VITA work and see lots of undocumented
Sch C income, which generates EIC.

The EIC is far more than the SE tax, and there's usually no
income tax here.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Gary Goodman wrote:

- quote -

Does income have to be earned to be able to be contributed
to a Roth IRA?

Stu

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William Brenner wrote:

- quote -

But if the payments to a child are wages from a parent's
controlled corporation there could be a NCAA problem. Had a
client who employed football Players over the summer on
construction projects as laborers.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247
EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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Dick Adams <rdadams[at]smart.net> wrote:

"Compensation income" for funding an IRA:

...from pet-sitting; yes.

...getting good grades; no.

...scoring soccer goals; no.

On that last one, I'll have to add a caveat, something like "on the
reasonable - I hope - assumption that his soccer playing is as an
amateur."

As for the thresholds for filing and owing taxes, I'll let the
detail-oriented guys handle the answer...

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rdadams[at]smart.net says...

- quote -

I've heard of people who declare SE income on their
children's returns just to make a contribution to a Roth
IRA.

I've never looked into the value of paying taxes on phantom
income just to put money into a Roth.

Gary

--
You can probably X figure out X which letters to X delete to derive my
email address X.

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"Dick Adams" <rdadams[at]smart.net> wrote:

- quote -

In order of your questions:

1) Yes, no, no (is Joshua related to Freddie Adu?)
2) Close to $5000? (standard deduction) assuming no other income
3) I believe the SE threshold is $433

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Dick Adams wrote:

- quote -

Is Joshua your son? If so, make him a household employee
(see instructions for schedule H with your 1040) And if
under 18, no social security tax due.

But yes, ordinary income for ROTH IRA purposes. Best thing
since canned dog food.

Cheer$,
Harlan Lunsford, EA n LA

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