Schwab transfer bonus dilemma

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Mr. Potter
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Schwab transfer bonus dilemma

Post by Mr. Potter »

I’m considering transferring 3 retirement accounts to Schwab, 2 Roths and a inherited IRA. Both my wife and I would qualify for a $500 bonus each going into our Roths. Problem is we already maxed out the Roths for 2024 and we can’t add to the inherited IRA.
The rep said they could issue me a 1099 as interest but wasn’t sure. Anyone else receive a bonus with no room to deposit it?
Random Poster
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Re: Schwab transfer bonus dilemma

Post by Random Poster »

My Schwab IRA bonus didn’t count as a contribution. Are you sure that yours will or does?
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jebmke
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Re: Schwab transfer bonus dilemma

Post by jebmke »

I may be wrong but I think if they pay it into the IRA (either one)it is considered as earned interest in the IRA and not a contribution.
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jeffyscott
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Re: Schwab transfer bonus dilemma

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Random Poster wrote: Wed May 15, 2024 11:27 am My Schwab IRA bonus didn’t count as a contribution.
Same here. Schwab bonuses were recorded as earnings not contributions for Roth as well as traditional IRA transfers for me and spouse.
PaunchyPirate
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Re: Schwab transfer bonus dilemma

Post by PaunchyPirate »

Same here. There were no tax implications when I transferred my traditional IRA to Schwab. The bonus I got for my taxable account was counted as taxable income, however, and Schwab included the income on my Consolidated tax statement. It was shown included in Interest Income (1099-INT) and detailed as a "Promotional Award".
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Mr. Potter
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Re: Schwab transfer bonus dilemma

Post by Mr. Potter »

Schwab bonuses were recorded as earnings not contributions for Roth as well as traditional IRA transfers for me and spouse.
So did Schwab just send you a check and a 1099 for taxes? I assume it cannot be added to any of my 3 retirement accounts. I wasn’t planning on adding a taxable brokerage account.
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Mr. Potter
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Re: Schwab transfer bonus dilemma

Post by Mr. Potter »

I may be wrong but I think if they pay it into the IRA (either one)it is considered as earned interest in the IRA and not a contribution
It doesn’t seem right that this bonus could be added to a Roth that has already been max funded for 2024. If they sent me a check and called it interest that would work. If it’s just added to the Roth I would never had paid any tax on the bonus. I’ll just give Schwab a call back even though he already told me to consult my tax professional.
PaunchyPirate
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Re: Schwab transfer bonus dilemma

Post by PaunchyPirate »

Mr. Potter wrote: Wed May 15, 2024 12:36 pm
I may be wrong but I think if they pay it into the IRA (either one)it is considered as earned interest in the IRA and not a contribution
It doesn’t seem right that this bonus could be added to a Roth that has already been max funded for 2024. If they sent me a check and called it interest that would work. If it’s just added to the Roth I would never had paid any tax on the bonus. I’ll just give Schwab a call back even though he already told me to consult my tax professional.
In my case, I also transferred a small Roth to Schwab. The Roth did not get any deposit of bonus money. They split the bonus money between the traditional IRA and the taxable account. Granted, my Roth was a fraction of the size of the other 2 accounts, but they may do something similar with your bonus (i.e. putting it all in the inherited IRA).
Minty
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Re: Schwab transfer bonus dilemma

Post by Minty »

Mr. Potter wrote: Wed May 15, 2024 12:36 pm
I may be wrong but I think if they pay it into the IRA (either one)it is considered as earned interest in the IRA and not a contribution
It doesn’t seem right that this bonus could be added to a Roth that has already been max funded for 2024. If they sent me a check and called it interest that would work. If it’s just added to the Roth I would never had paid any tax on the bonus. I’ll just give Schwab a call back even though he already told me to consult my tax professional.
It makes perfect sense to me that one pays no taxes on interest, dividends, or capital gains earned in a Roth IRA. Isn't that the whole point of the advantage of the Roth structure?
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Mr. Potter
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Re: Schwab transfer bonus dilemma

Post by Mr. Potter »

It makes perfect sense to me that one pays no taxes on interest, dividends, or capital gains earned in a Roth IRA. Isn't that the whole point of the advantage of the Roth structure?
Well I love the idea of not paying taxes but I’m guessing the IRS wants a bite out of this, if Schwab could throw this in my Inherited IRA that would work too since I’ll pay taxes when I pull the money out someday.
toddthebod
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Re: Schwab transfer bonus dilemma

Post by toddthebod »

Mr. Potter wrote: Wed May 15, 2024 1:19 pm
It makes perfect sense to me that one pays no taxes on interest, dividends, or capital gains earned in a Roth IRA. Isn't that the whole point of the advantage of the Roth structure?
Well I love the idea of not paying taxes but I’m guessing the IRS wants a bite out of this, if Schwab could throw this in my Inherited IRA that would work too since I’ll pay taxes when I pull the money out someday.
The IRS is fully aware of brokers depositing transfer bonuses for Roth IRA accounts into those accounts and not considering them contributions. They would have put a stop to it years ago if they cared.
diy60
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Re: Schwab transfer bonus dilemma

Post by diy60 »

My bonus money was split according the accounts the funds were moving into. Brokerage bonus does not count as a contribution. You will only get a 1099 if any of the bonus goes into a taxable account. I have done these moves several times. I can’t answer about an inherited IRA.
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jeffyscott
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Re: Schwab transfer bonus dilemma

Post by jeffyscott »

Mr. Potter wrote: Wed May 15, 2024 11:50 am
Schwab bonuses were recorded as earnings not contributions for Roth as well as traditional IRA transfers for me and spouse.
So did Schwab just send you a check and a 1099 for taxes? I assume it cannot be added to any of my 3 retirement accounts. I wasn’t planning on adding a taxable brokerage account.
There's no check, the money is just added to the account that earned the bonus. If it's a Roth there is no 1099 and no taxes, just like there's no 1099 and no taxes on any other earnings within a Roth account.
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TomatoTomahto
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Re: Schwab transfer bonus dilemma

Post by TomatoTomahto »

toddthebod wrote: Wed May 15, 2024 1:32 pm
Mr. Potter wrote: Wed May 15, 2024 1:19 pm
It makes perfect sense to me that one pays no taxes on interest, dividends, or capital gains earned in a Roth IRA. Isn't that the whole point of the advantage of the Roth structure?
Well I love the idea of not paying taxes but I’m guessing the IRS wants a bite out of this, if Schwab could throw this in my Inherited IRA that would work too since I’ll pay taxes when I pull the money out someday.
The IRS is fully aware of brokers depositing transfer bonuses for Roth IRA accounts into those accounts and not considering them contributions. They would have put a stop to it years ago if they cared.
I was shocked that $500 of “Promotional Earnings” were added to a Roth account. No 1099. There were taxable accounts they could have added the bonus to (and they did), but thanks, I don’t often get literally tax free money.
I get the FI part but not the RE part of FIRE.
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Mr. Potter
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Re: Schwab transfer bonus dilemma

Post by Mr. Potter »

There's no check, the money is just added to the account that earned the bonus. If it's a Roth there is no 1099 and no taxes, just like there's no 1099 and no taxes on any other earnings within a Roth account.
So even if a guy maxed out his Roth contribution's the brokerage can still add the transfer bonus? Dang, that’s the best news I’ve heard all day. Nice.
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TomatoTomahto
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Re: Schwab transfer bonus dilemma

Post by TomatoTomahto »

Mr. Potter wrote: Wed May 15, 2024 4:03 pm
There's no check, the money is just added to the account that earned the bonus. If it's a Roth there is no 1099 and no taxes, just like there's no 1099 and no taxes on any other earnings within a Roth account.
So even if a guy maxed out his Roth contribution's the brokerage can still add the transfer bonus? Dang, that’s the best news I’ve heard all day. Nice.
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I get the FI part but not the RE part of FIRE.
tj
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Re: Schwab transfer bonus dilemma

Post by tj »

Mr. Potter wrote: Wed May 15, 2024 4:03 pm
There's no check, the money is just added to the account that earned the bonus. If it's a Roth there is no 1099 and no taxes, just like there's no 1099 and no taxes on any other earnings within a Roth account.
So even if a guy maxed out his Roth contribution's the brokerage can still add the transfer bonus? Dang, that’s the best news I’ve heard all day. Nice.
Of course.... transfer bonuses have nothing to do with your annual contributions.
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Re: Schwab transfer bonus dilemma

Post by placeholder »

I just did the 3% robinhood bonus and received five figure bonuses in each of a traditional and roth ira and I'm not even allowed to make an ira contribution as I have no income so quit worrying about your 500 as these bonuses have been going on for many years and they never are counted as contributions.
sycamore
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Re: Schwab transfer bonus dilemma

Post by sycamore »

Yet another data point: Over the years I've done at least four transfers that got me a bonus into various IRA accounts of mine. Never got a 1099.

And I fully expect the Robinhood bonus for this year will be the same.
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Re: Schwab transfer bonus dilemma

Post by placeholder »

sycamore wrote: Wed May 15, 2024 9:18 pm Yet another data point: Over the years I've done at least four transfers that got me a bonus into various IRA accounts of mine. Never got a 1099.
You wouldn't get a 1099 regardless the fear some have is that you would get a 5498 indicating a contribution but I'm not even sure if it's legal for some outside entity to make a contribution for an individual but this is something that's been going on so long with the same fears that my buddy earl covered it in the mini faq back in 2016:

viewtopic.php?t=196884
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Re: Schwab transfer bonus dilemma

Post by placeholder »

I'll add that there are custodians that will issue a 1099 for a bonus due to an ira transfer but that's because they don't put the money in the ira but instead make you open a taxable account and they put it there.
HIinvestor
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Re: Schwab transfer bonus dilemma

Post by HIinvestor »

Hmmm, Schwab told me they don’t count IRAs in deciding whether to give transfer bonuses or retention bonuses.
tj
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Re: Schwab transfer bonus dilemma

Post by tj »

placeholder wrote: Wed May 15, 2024 9:29 pm I'll add that there are custodians that will issue a 1099 for a bonus due to an ira transfer but that's because they don't put the money in the ira but instead make you open a taxable account and they put it there.

That's completely different.
tj
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Re: Schwab transfer bonus dilemma

Post by tj »

HIinvestor wrote: Wed May 15, 2024 9:38 pm Hmmm, Schwab told me they don’t count IRAs in deciding whether to give transfer bonuses or retention bonuses.
I've never heard of them doing a retention bonus - every now and then they'll have a public transfer bonus offer. What they do is match other firms transfer bonuses...if you get the right person on the phone.
Last edited by tj on Wed May 15, 2024 10:29 pm, edited 1 time in total.
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Re: Schwab transfer bonus dilemma

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tj wrote: Wed May 15, 2024 10:09 pm
placeholder wrote: Wed May 15, 2024 9:29 pm I'll add that there are custodians that will issue a 1099 for a bonus due to an ira transfer but that's because they don't put the money in the ira but instead make you open a taxable account and they put it there.

That's completely different.
Isn't that what I said?
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Mr. Potter
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Re: Schwab transfer bonus dilemma

Post by Mr. Potter »

Hmmm, Schwab told me they don’t count IRAs in deciding whether to give transfer bonuses or retention bonuses.
Schwab said my bonus was based on my total amount but would be applied to my 2 largest accounts which happens to be my wife’s and my Roth. I was hoping to get the $1,000 bonus amount but instead they said I would only qualify for 2 $500 bonuses. I’m probably not the best negotiator but I think I won this one.☝️
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