Brokerage New Account Bonuses

[COcheesehead]

Quote:

Originally Posted by Bestwifeever Is Fidelity still giving complimentary TurboTax?

Hope so. The link usually appears in the next 30 days.

[audreyh1]

Quote:

Originally Posted by Bestwifeever Is Fidelity still giving complimentary TurboTax?

They did last year, so fingers crossed....

[Scuba]

Quote:

Originally Posted by Golden sunsets I have done two transfers to Merrill Edge each for $200,000 and each earning a $1,000 bonus. Neither was reported as income.

Interesting. I looked at my YTD tax info on the Fido website and they include it as Misc Income.

[COcheesehead]

The IRS loves unreported income.

[GrayHare]

As I understand it, a bonus to an IRA account is a gift. A bonus into a non-retirement account is taxable income.

[audreyh1]

Quote:

Originally Posted by GrayHare As I understand it, a bonus to an IRA account is a gift. A bonus into a non-retirement account is taxable income.

Good point. Although it seems any IRA bonus would be taxed at withdrawal.

I always got a 1099 tax form from a bank or CU for any type of cash bonus. Even once for a non-cash benefit!!!

[Debinnov a]

Quote:

Originally Posted by Luck_Club When did you get this bonus? I recently moved amounts over to fidelity, and all I got was a 2 year free trade on only that account! I'm going to call on monday and tell him, I'll take the hit on $60 in trading fees and move the money if he doesn't give me the 0.25% bonus. I'm quite upset. I even asked about cash bonuses, last month when I moved the money, and had been discussing the move for 10 months.

When I was there this week, she told me that they stopped paying bonuses on less than $1M. I think they might still offer some free trades.

[Montecfo]

Quote:

Originally Posted by GrayHare As I understand it, a bonus to an IRA account is a gift. A bonus into a non-retirement account is taxable income.

That is not correct.

[Helen]

We moved my spouses account, our Roths and a few joint accounts from Vanguard to Fidelity. I already had a size able account at Fido. We did this in May or June of this year and received a $2,500 transfer bonus. I had to ask the account rep for it and I verified that we received it. Maybe we got in just under the wire?

[Golden sunsets]

Quote:

Originally Posted by GrayHare As I understand it, a bonus to an IRA account is a gift. A bonus into a non-retirement account is taxable income.

Bingo. My two transfers and bonuses were to IRA's and not reported as income, but will eventually be taxed, as RMD's deplete the account.


Sent from my iPad using Early Retirement Forum

[swakyaby]

Quote:

Originally Posted by GrayHare As I understand it, a bonus to an IRA account is a gift. A bonus into a non-retirement account is taxable income.

This is what my Fidelity rep hinted at.

[Montecfo]

Quote:

Originally Posted by Golden sunsets Bingo. My two transfers and bonuses were to IRA's and not reported as income, but will eventually be taxed, as RMD's deplete the account. Sent from my iPad using Early Retirement Forum

Just to be clear, the signup bonuses are not a "gift". To make a gift an enterprise must intend to make a gift expecting nothing in return. Clearly, that is not the case here.

Brokerages seem to take various approaches to taxability of these. Their interpretations seem to change from year to year. I doubt there is clear authority on them to this point.

Having said that, I expect IRS would rule them taxable unless a case can be made successfully that they are merely a rebate of future commisions. Some brokerages make all such payments taxable. This is the wise approach IMHO.

If they are a rebate of future commissions, then they should be tax free no matter the account type. This does not seem the approach taken consistently

They are not dividends or interest that is taxable or tax free due to account type. This is because they are not dividends or interest. They are an incentive payment paid for transferring an account, not due to owning particular securities. The payment is actually earned by the account owner, not by the IRA. And paying it to an IRA does not make it tax free. It may instead be an excess contribution.

And lastly, I do not think you can take untaxed money and put it into a Roth, even if your brokerage thinks you can.

I expect there will be some guidance at some point.

FYI, I am not offering tax advice. Just think the question is interesting and not well understood.

[Scuba]

Quote:

Originally Posted by GrayHare As I understand it, a bonus to an IRA account is a gift. A bonus into a non-retirement account is taxable income.

This makes sense given that IRA withdrawals are all taxable income.

[swakyaby]

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Originally Posted by Montecfo And lastly, I do not think you can take untaxed money and put it into a Roth, even if your brokerage thinks you can. .

I don’t think anyone here said the bonus was deposited tax-free into a Roth IRA.

[Montecfo]

Quote:

Originally Posted by swakyaby I don’t think anyone here said the bonus was deposited tax-free into a Roth IRA.

It was suggested that a bonus to an IRA is a "gift". If that were true, it would not be taxable even to an after-tax account, much less a Roth IRA.