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Why? I mean why?
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Does Bank of America do a Mega Back door 401K?
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Yes that’s really smart. I don’t have kids but that’s a great idea to be able to start a Roth for them
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My financial advisor uses her family picture on xmas/holiday cards that she sends to all her clients and pays each kid $6k per year
Is it necessarily if a third party would pay YOU or if a third party would pay anyone for stock photography of family pics. Or whatever the service is. Let’s say your kid does lawn care for your business, do they have to prove that someone else would also pay their kid to do it or just what the market value in that area is if those services.
Is it a real business? If so that is fine if it is a reasonable wage. If not, it is tax fraud and you should not do it.
Classmate in my typing class in high school in LA was a baby model. Parents put that money into a college fund and let it grow. College was paid for via this.
Its a real option.
How much do baby models even make?
Real business (I pay my llc fees and there’s income and expenses flowing through). 6k plus some a year for modeling fees per kid as independent contractors sounds reasonable. Paying self employment/FICA as applicable and all that good stuff.
Does the IRS stipulate how effective the advertisement campaign needs to be? 😂
The calc: FV=PV(1+i)^n
The rest:
Regards less if you have a business or not (biz with legit reason has added benefit of additional expense): Pay them for modeling during a photo shoot (gig work as an independent contractor). Then put that money in their rothIRA that you are the custodian for (fidelity offers the service). Then for taxes it’ll look something like this if it’s 6k of income (DOUBLE the FICA since it now becomes SECA) (I’m using RI for state, yours can be diff). Then give your kids a gift of whatever their tax liability is to pay their taxes (assuming you haven’t gone over gift limits or just give it to them like the average parent whose giving an allowance over the course of a year). Definitely an oversimplification… tax people come at me. #consultyourcpa
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I tend to agree. It’s a good tool for someone already running a business and just adding the kids on to the regular payroll, but to try to do this solely for your kids is a lot of work with some risk.
I need to know more about this… I have a newborn and I’m looking to stash some cash
That is where I opened it for my daughter when she got her first job at 15
Ours was recently in a commercial and we took the proceeds and put into a normal brokerage account. Wondering now if I should have done IRA… Plan is to park it, thought was without it being IRA allows for use prior to retirement.
You could still put it in an Ira now if the pay was in 2021. Contributions to an Ira can be taken out at any time. The earnings have to stay in or you have tax and penalties
How does this work?
I posted an explanation in the main thread.
How did you calculate 6k -> 5m?
“12k into 5m”…. Math was FV=PV(1+i)^n. I used avg of 10% for i which is close to what it’s been since inception and over last 65 years (give or take a third of a percentage point)
I asked this on the tax bowl. Best way is through your family/personal business, making sure you have a legit purpose for the expense, paying all taxes etc, and you are paying fair market value.
My parents did something similar. I modeled in retailers’ weekly flyers and was able to earn income in order to contribute to my Roth IRA. This is something great for stay at home parents to do. I usually got to keep the clothes and was paid about $100 an hour back in the early 2000s.
When they are a tad older .. could you pay them for cleaning and other chores they do? Also as they age… could you pay them for being your driver ? I like your thought process though , sounds totally legal and a wise thing to do.
What tax bowl?