WWTBAM Bored

I am doing my taxes (yes, I procrastinated), and I have a dumb question about my new Roth IRA, which was set up last year. (I am completely new to IRAs, hence the dumbness.) I earned about $71 last year in dividends, which were reinvested in shares. I have not withdrawn anything. Do I need to report this money anywhere on my tax return? I'm trying to figure out the rules, but I am thoroughly consoozed. Thanks!

JBillyGirl wrote:I am doing my taxes (yes, I procrastinated), and I have a dumb question about my new Roth IRA, which was set up last year. (I am completely new to IRAs, hence the dumbness.) I earned about $71 last year in dividends, which were reinvested in shares. I have not withdrawn anything. Do I need to report this money anywhere on my tax return? I'm trying to figure out the rules, but I am thoroughly consoozed. Thanks!

I think it is not taxable.

I hope someone else answers who is certain.

At worst, at that small an amount, it is unlikely to bump you into a higher bracket, so you are safe not to report it.

If they nail you for $5 in a few years, send me the bill.

IRA's are not taxable as far as I know, until you start pulling money out. I have an IRA which I can no longer make contributions due to some reason, I forget what. Anyway, it earns interest...not dividends...every year. I get a form that says this information has been sent to the IRS, however it is NOT taxable as long as I leave the money there.

Roth IRA's are a bit different, but it's my opinion you're not taxed on those dividends. Hopefully Bob### or dodgersteve will bail us out here. They're both west coast, so maybe there's still time for them to answer you tonight, if dodgersteve got to leave that BD party early enough.

JBillyGirl wrote:I am doing my taxes (yes, I procrastinated), and I have a dumb question about my new Roth IRA, which was set up last year. (I am completely new to IRAs, hence the dumbness.) I earned about $71 last year in dividends, which were reinvested in shares. I have not withdrawn anything. Do I need to report this money anywhere on my tax return? I'm trying to figure out the rules, but I am thoroughly consoozed. Thanks!

You need not report the return, or any other transaction that occurs wholly within an IRA. --Bob

JBillyGirl wrote:I am doing my taxes (yes, I procrastinated), and I have a dumb question about my new Roth IRA, which was set up last year. (I am completely new to IRAs, hence the dumbness.) I earned about $71 last year in dividends, which were reinvested in shares. I have not withdrawn anything. Do I need to report this money anywhere on my tax return? I'm trying to figure out the rules, but I am thoroughly consoozed. Thanks!

No, they would have sent you a 1099 or other form if you had to.

I'll join in and say those dividends are not taxable and you don't need to report it. Furthermore, because this is a Roth IRA, you wont' be liable for taxes when you withdraw that money at retirement age, either.

But, on the downside, your contributions to that account weren't tax deductible.

Usually, you will get a 1099 form from the firm with whom your plan is with and you can just enter the amounts noted on your 1040. The 1040 will generally say, enter amount from Box #10 (or some other number) on form 1099 here. But, generally speaking, as long no money was withdrawn you would not have any distributions to report.

the waiting period on distributions from a Roth is 5yrs, at which time you can pull it all out without tax consequences - distributions from a traditional IRA are subject to tax, plus a 10% penalty if you draw them out before age 59 1/2. you can always make a Roth contribution, even if covered by a qualified retirement @ work ($4000 max), and there is no age limit, as in a traditional IRA (no contributions after age 70 1/2)

7yrscollegedownthedrain wrote:the waiting period on distributions from a Roth is 5yrs, at which time you can pull it all out without tax consequences - distributions from a traditional IRA are subject to tax, plus a 10% penalty if you draw them out before age 59 1/2. you can always make a Roth contribution, even if covered by a qualified retirement @ work ($4000 max), and there is no age limit, as in a traditional IRA (no contributions after age 70 1/2)

I don't believe you can pull earnings out of a Roth before 59 1/2. You can take out the original contributions after they have been in for 5 years but not the earnings without incurring a penalty.

There are income limits to making contributions to a Roth IRA if you are covered by a 401K as well. You can always make a contribution to a traditional IRA if you are not permitted to make a Roth contribution. The contributions to the traditional IRA are tax deductable but again only up to certain income limits when covered by a 401K or similar plan (like the government TSP). Beyond income limits the traditional IRA contributions can still be made but can not be deducted either. But you can keep track of what you contribute to it after taxes as a basis so that you are not taxed a second time (or third or fourth, I have lost track) when you do eventually withdraw the money from the traditional IRA.

However, it should be noted than I am not an accountant nor do I play one on TV. The rules are many and expert help, or at least someone other than me, should be consulted when trying to determine what option is the best fit.

Thanks, everyone! I thought that was the case, but I panicked a bit and just wanted to make sure.

Mini-rant about NJ state income taxes: If you make $10K or less in gross income, you don't have to pay taxes, but the personal exemption for a single taxpayer is only $1K. So unless I'm getting it all wrong, if you make exactly $10,000, you pay taxes on nothing; but if you make $10,001, you pay taxes on $9,001. Now, I don't mind paying taxes -- it's no fun at all, but it's the price we pay for civil society -- but to me this particular system seems a bit whacked. End of rant; time to write the check (about $202 this year; it's those damn sweepstakes wins ).