Brenner answers questions about all aspects of family finance.
I am 52 years old and currently unemployed but receiving an annual income from winnings from Atlantic City. Can I open up a Roth IRA?
Only if you can satisfy the Internal Revenue Service that you're a professional gambler rather than an unemployed person who has been very lucky between jobs.
There's no minimum or maximum age requirement for making annual contributions to a Roth IRA. But you must have earned income -- and that means money that you earned from working, such as wages, tips, bonuses, royalties and professional fees. Taxable alimony payments would also qualify as earned income, says Michael Alderman, an East Meadow tax accountant; but Social Security benefits, pension income and investment income like capital gains, interest and dividends do not.
To convince the IRS that you're a professional, Alderman says you must be able to demonstrate that gambling is "a regular, continuous and substantial activity that you engage in for profit throughout the tax year." It's helpful if you've maintained a businesslike record of your winnings and losses, for example.
If you can substantiate that your gambling activity rises to the level of a trade or business, you'll be entitled to contribute some of your winnings to a retirement plan -- unless you've won too much: Eligibility to make Roth IRA contributions phases out for single taxpayers with modified adjusted gross income between $110,000 and $125,000, and for married taxpayers with between $173,000 and $183,000 of modified adjusted gross income. Assuming you qualify, the maximum annual contribution for people who are 50 or older is $6,000. It's $5,000 for those who are younger. The deadline for making 2012 IRA contributions is April 15, 2013.
The bottom line Only people with earned income are eligible to contribute to a Roth IRA.
Websites with more information bit.ly/XTHwPR and bit.ly/Xfl8kr