<p>I’m wondering if I can open a traditional IRA for my college D without her knowledge (until, say, college graduation) and without getting her in any trouble with the IRS. She had a part-time job in 2013. She didn’t make enough money to owe fed’l or state income taxes. She has already filed both federal and state income tax returns.</p>
<p>If I open a traditional IRA for her against her 2013 earnings before April 15, will this cause any problems since she already filed her taxes? I’m thinking that since she didn’t owe any federal income tax, that it wouldn’t need to be reported on her tax return. If it needs to be reported, then I can’t keep it a secret. </p>
<p>Thanks in advance for any advice/suggestions.</p>
<p>You can open an IRA for her. I would recommend a Roth IRA versus a traditional IRA–it has huge future tax advantages. It can be funded up to $5,500 provided she earned this amount. It wouldn’t be a tax deduction so I don’t see why you would need to revise her taxes. t believe you can open one up online with her social security number. </p>
<p>Yes, you’d have to find out her gross earnings. That would be the cap on what you could contribute to an IRA in her name. She would get a statement from the custodian of the funds showing they exist and could use them as she chooses. Once you give them, the funds are hers. I did it for each of my kids, no strings attached. </p>
<p>The funds are still hers and she could withdraw and spend, paying any required penalty. I too would choose a Roth IRA, which is what we did open for our kids. </p>
<p>I agree with all of the above. You can contribute to an IRA for her up to her earned income or $5,500 whichever is lower. Make it a Roth and won’t affect her tax return. You have until April 15 to do it for 2013. Don’t make it a traditional IRA because you’ll have to track the basis and there is no tax advantage so no reason to do it. </p>
<p>Yes, the funds are hers. But you may be able to hide the statements from her until graduation or whenever you want to present the gift. However, if you have doubts about her judgement perhaps you want to wait to a different time to fund her account.</p>
<p>If you aren’t certain about her judgment, you may well prefer to wait. Each person can gift up to $14,000 per year to any other person without filing any gift tax return. This means you can give $14,000 per year, as can your spouse. </p>
<p>We opened small Roth IRAs for each of our kids to match the amount they earned while they were students. Neither have touched their accounts, tho they are the owners. </p>
<p>IRAs are a nice thing and a good thing for our kids to start thinking about as early as possible. That was why we opened one for each kiddo. S has since been contributing (I believe the max) to his retirement accounts since he has started working upon graduation. </p>
<p>I think it is a good way to teach our kids to build wealth and to save early for retirement. I convinced my DS to open a Roth IRA for 2013. He had made good money from a summer internship and from his on campus part time job. Since I did not want to buy a material graduation gift, I made a contribution for 2014 to the same account. He has not mentioned anything to me since he may have gotten a confirmation email from the fund company. But at the right time I will let his know :)</p>
<p>Hondu- You gave me a great idea to think about. Maybe instead of a material graduation gift, I will offer to fund her Roth IRA for several years. I was well-educated about the stock market at an early age by my father. I am afraid that my very liberal arts daughters don’t share my education. I hope to pass along my knowledge so they can make good decisions going forward.</p>
<p>One thing I just learned the hard way I thought I’d pass on. There’s a really nice “saver’s credit” that young people can claim on their taxes, which I believe is limited to first-time IRA investors. D is getting a whopping refund for opening one last year. Sadly, S, who also opened his first IRA at the same time, can’t claim the credit because he didn’t earn enough to owe taxes. In retrospect, S wishes that he waited. I don’t know the ins and outs of the credit and D did the calculations, but it may be something to consider before opening a first-time IRA. </p>
<p>The instructions don’t seem to indicate the credit can only be claimed once or that you have to have new IRA, just be below income limits and not full time student. </p>