Can I pretend I made $5000 from selling stuff on ebay to open a Roth IRA?

I need earned income to open a Roth IRA, I am only 19 year old and I am a full time student.

I did sold stuff on ebay back in Fed-Mar 2008 and earned about $3000, but I want to contribute the max which is $5000, so could I just pretend I made $5000 to contribute the max for a Roth IRA?

How do I open a Roth IRA account at Scottrade? I have a individual account, so do I have to fill out another form? How do I file for taxes? Scottrade said I need a W-2 form, but people said I need Schedule C form for ebay. I don't know anything about taxes since I never fill one out before. Please help
Additional Details
I don't care about paying taxes, I all I want is to be able to contribute $5000 in a Roth IRA

Actually it's more complicated than faking income. First of all, your Ebay activities are not considered by IRS as a business, which means those fake $5000 don't qualify for Roth IRA and you still have to pay capital gain tax unless you can prove it is a business. To prove it is a business, you would have to have cost basis in the stuff that you sold and prove that you have been doing it for profit for at least three out of five years.

If you don't pass the profits test, then you'll have to prove that you carry on the activity in a businesslike manner. This includes, for example, keeping good books and records, promoting your business and holding down costs where possible.

Now let's pretend you prove it is a business, then you'll have to pay SE tax of about 15% so $5000 would yield about $750 in SE tax. This also means that you can't contribute the full $5000 to the Roth IRA because you don't have $5000 of income after taxes. In other words, you have to fake $6000.

Here's the best part, when the IRS audits your tax return and find out about your fake income (trust me, they will find out if you get audit), you'll get slap with penalties and additional taxes on your IRA contributions. Your $5000 in the IRA is going to get wiped out after figuring the penalties and taxes. This is not even the worst case. Your actions are considered intentional fraud and IRS will most likely press charges.

You are not giving Uncle Sam free money, Uncle Sam has the right to the money. And because the earnings in Roth IRA are tax-free, you are avoiding paying taxes.

Dude, you really think you can outsmart the IRS??

Why don't you just open a regular broker account and pay taxes when you have gains. Seriously, you don't want to mess with the IRS. It's going to be a painful experience.

If you in fact turn $3000 into $100,000, then you wouldn't mind paying taxes like everybody else.

I don't mean to be like your parent but I just don't want you to get in trouble especially with the IRS.

That would be tax fraud.

Are you in the business of selling stuff on e-bay? Do you buy and sell for this purpose? If so, file a Sch C and SE, which both attach to Form 1040. The net income can be contributed to a Roth.

If you are just selling stuff you already own on e-bay, then you report any items you sold at a profit on a Sch D. That income would not be earned income so would not count toward Roth contributions.

I respect your eagerness but don't make up false income for this purpose. Look for a part-time job and you can use that income to justify a Roth for 2009.

You have to have earned income to open a Roth IRA. The Roth IRA is a way for people to shelter current income taxes.

You have neither earned income, nor the need to shelter current income taxes, since you owe no income tax.

Not only can you not open a Roth IRA, it makes no sense for you to do so at this time. As fully explained in a previous answer, pretending to have earned income is foolish.

If you work in 2009, open a Roth IRA at that time and make contributions as you earn money.

Your e-Bay income is self employment income. you must file tax return if income is $400 or more.
You are self employed or independent contractor. You will report your income and expenses on schedule C or C-EZ (Form 1040). This income is subject to SE tax at 15.3%. Read about self employed (or independent contractor) tax filing and payment of estimated taxes: http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html

not give you tax advice but if you say you made 5,000 then the IRS is going to want the appropriate taxes.

I don't see why not?.... I mean, usually people try for the other way-no one ever claims higher.

Enter Your Message or Comment

User Name:
User Email:
Post a comment:

Archive: Forum -Forum -Finance - Links - 1 - 2 - RSS - All RSS Feeds
The Causes and the Results. 0.054
Copyright (c) 2011 Financial Crisis Tuesday, May 29, 2012 - Terms of use - Privacy Policy