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Roth IRA for Child Model

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  • #31
    Originally posted by SteffanW View Post

    The utilization of models was not considered until I offered my son’s services.

    My son has had one previous modeling gig for onesies. He was paid in onesies...haha. But this was a legit modeling gig and his image was used by a business to sell onesies.
    What was the value of the onesies?
    if the parents business wants to hire a 2 year old for ordinary and necessary business expenses, that is fine.
    Is the expense paid as a contractor or employee?

    How the individual reports it and retirement options available are separate questions.

    The IRS does have available substantial case law of substance vs form doctrine and rulings for disallowing tax avoidance and evasion schemes, in particular for related party transactions and tax preferred vehicles.
    The penalties can be onerous and retroactive for each year of noncompliance.
    “The Court relies on IRS Notice 2004-8, advising taxpayers that certain transactions using Roth IRAs and your own business are viewed as abusive tax-avoidance transactions.”

    An existing business or earnings stream is much stronger than a brand new one created only for a two year old with no other function than taxes.

    The exposure comes not only from the individual $500 contribution, but a full audit of the grandparents, parents, or eventually the child. Even with documentation of this transaction, their is a long tail on the risk. Much more than the $500 contribution for photos of children.

    Not directly on point, but the case deals with related parties, Roth IRAs, and creation of new structures to allow tax sheltering advantages. Typically, if it sounds too good to be true, it might be. From your post, you suggested this solely for tax advantages rather than how to best handle the earnings of your child’s business.

    Full disclosure: Cute kid !