tax ramifications of receiving a bonus into Roth account

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CenTexan
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tax ramifications of receiving a bonus into Roth account

Post by CenTexan »

What are the tax ramifications of receiving a bonus into your Roth account?

Schwab is offering $600 to move $250k new funds into a my Schwab Roth account. The bonus letter says it will pay the money directly into that account.

Confused about how this "un-earned" income can be placed in my Roth . . .

How is this looked at from the IRS point of view? Will the bonus complicate my record keeping for the Roth?
livesoft
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Re: tax ramifications of receiving a bonus into Roth account

Post by livesoft »

There is no tax ramification. This is just like your Roth IRA earned some interest from your money that you deposited into your Roth IRA.
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placeholder
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Re: tax ramifications of receiving a bonus into Roth account

Post by placeholder »

Think about like you bought a cd in a roth and if it is over a certain value they give you an interest rate boost.
billfromct
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Re: tax ramifications of receiving a bonus into Roth account

Post by billfromct »

Sounds like they contribute $600 to your Roth IRA & that reduces your 2022 Roth IRA contribution limit. I guess they assume (you know what happens when you assume) that you have earned income & that your income is under Roth IRA Modified Adjusted Gross income limits.

You might want to check the fine print.

bill
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Re: tax ramifications of receiving a bonus into Roth account

Post by placeholder »

billfromct wrote: Sat May 21, 2022 7:40 pm Sounds like they contribute $600 to your Roth IRA & that reduces your 2022 Roth IRA contribution limit. I guess they assume (you know what happens when you assume) that you have earned income & that your income is under Roth IRA Modified Adjusted Gross income limits.

You might want to check the fine print.
That has never been the case with any ira bonus that I received so I don't know why you assume that to be the way things work.
placeholder
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Re: tax ramifications of receiving a bonus into Roth account

Post by placeholder »

I would recommend that any questions about deposit bonuses be asked in the ongoing mega thread: viewtopic.php?t=196884
billfromct
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Re: tax ramifications of receiving a bonus into Roth account

Post by billfromct »

“That has never been the case with any ira bonus that I received so I don't know why you assume that to be the way things work.”

Placeholder, since you got an “ira bonus”, it would be helpful to explain if when that “ira bonus” was deposited to your IRA account, did it affect your annual IRA contribution limit for that year?

bill
sailaway
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Re: tax ramifications of receiving a bonus into Roth account

Post by sailaway »

CenTexan wrote: Sat May 21, 2022 8:58 am What are the tax ramifications of receiving a bonus into your Roth account?

Schwab is offering $600 to move $250k new funds into a my Schwab Roth account. The bonus letter says it will pay the money directly into that account.

Confused about how this "un-earned" income can be placed in my Roth . . .

How is this looked at from the IRS point of view? Will the bonus complicate my record keeping for the Roth?
It isn't a contribution, but rather earnings within the account, just like when your stock goes up or your CD pays interest. As such, there is nothing to track in terms of your record keeping.
placeholder
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Re: tax ramifications of receiving a bonus into Roth account

Post by placeholder »

billfromct wrote: Sat May 21, 2022 8:20 pm “That has never been the case with any ira bonus that I received so I don't know why you assume that to be the way things work.”

Placeholder, since you got an “ira bonus”, it would be helpful to explain if when that “ira bonus” was deposited to your IRA account, did it affect your annual IRA contribution limit for that year?
As I said that has never been the case for me.
Alan S.
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Re: tax ramifications of receiving a bonus into Roth account

Post by Alan S. »

placeholder wrote: Sat May 21, 2022 8:40 pm
billfromct wrote: Sat May 21, 2022 8:20 pm “That has never been the case with any ira bonus that I received so I don't know why you assume that to be the way things work.”

Placeholder, since you got an “ira bonus”, it would be helpful to explain if when that “ira bonus” was deposited to your IRA account, did it affect your annual IRA contribution limit for that year?
As I said that has never been the case for me.
It's not a contribution and the custodian will not report one on a Form 5498. The bonus does not change your Roth IRA contribution basis, so essentially you just ignore it.

Likewise, if you do not meet the conditions for the bonus such as leaving the new contributions that earned you the bonus in place for the specified period stated as conditions for receiving the bonus, the custodian will claw back the bonus and this will not be reported as a distribution, just like it wasn't a contribution.
placeholder
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Re: tax ramifications of receiving a bonus into Roth account

Post by placeholder »

I'm not even sure if a third party could legally make a contribution to your ira from their money.
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