My son is turning 20 next month, works at a local grocery store 30-35 hours per week, and earned $15,000 last year. I helped him fill out his 2014 taxes, but he has not filed them yet. He is getting $1,000 refund, and since I know you can contribute to an IRA for 2014 until April, we redid his taxes to see the difference with an IRA contribution. He is eligible for the saver’s credit, so if he contributes $1,000 to a Roth IRA his refund will be $1,500, and if he contributes to a traditional IRA his refund will be $1,568.
1) Even though he would get a slightly bigger refund with the traditional IRA, should he do the Roth since he is in a low tax bracket?
2) If he ever decides to go back to school and needs to access the account for tuition money, is it better to have a traditional or Roth?
3) Where is the best place to start an IRA with only $1,000? Are there fees and expenses that we need to watch out for?
4) How do you actually start the IRA – an online transfer from his savings account, or do you have to send a check?
5) After the initial account is set up, can he make contributions on a weekly/monthly basis into the same account?
6) Is there anything he needs to do to make sure his 2014 taxes are filed correctly? TurboTax only asks if you made an IRA contribution for 2014 before April 2015. Will the financial institution send documentation to the IRS after he opens the account?
Thank you for your help!