Renwanz Insurance & Financial Solutions, Carlsbad, CA
Earned income comes from the IRS regulations as a qualifier for being able to contribute to a Roth IRA. It means you must earn compensation through work you have performed for your efforts in one form or another.
There are two ways to receive earned income:
1) Work for someone who pays you (you'll receive a W-2)
2) You own or operate a business or farm (Schedule C will be filed with your tax return)
The IRS defines earned income as wages, salary, tips and other taxable employee pay; Union strike benefits; Long-term disability benefits received prior to minimum retirement age; net earnings from self-employment if you own or operate your own farm or business; income as a minister or member of a religious order or a statutory employee and have income.
There are plenty of categories that are not counted as earned income. Here are examples of income that are NOT considered earned income:
Interest and dividends, retirement income, Social Security benefits, Unemployment benefits, alimony, child support, pay received while an inmate in a penal institution.
The bottom line is the IRS wants to make sure you are performing work that will ultimately get them more tax revenue before they will let you pour more money into a tax deferred or tax exempt vehicle.
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There are two ways to receive earned income:
1) Work for someone who pays you (you'll receive a W-2)
2) You own or operate a business or farm (Schedule C will be filed with your tax return)
The IRS defines earned income as wages, salary, tips and other taxable employee pay; Union strike benefits; Long-term disability benefits received prior to minimum retirement age; net earnings from self-employment if you own or operate your own farm or business; income as a minister or member of a religious order or a statutory employee and have income.
There are plenty of categories that are not counted as earned income. Here are examples of income that are NOT considered earned income:
Interest and dividends, retirement income, Social Security benefits, Unemployment benefits, alimony, child support, pay received while an inmate in a penal institution.
The bottom line is the IRS wants to make sure you are performing work that will ultimately get them more tax revenue before they will let you pour more money into a tax deferred or tax exempt vehicle.