Does IRS tax your savings? How much do I pay on interest from my bank accounts?

Wait so even if I don't get a 1099 form I still have to report it? What if my bank paid me like $4 in interest for the year? Seems like so much hassle for basically nothing.

Technically, yes, all interest income is taxable regardless of the amount. The $10 threshold is just for when banks are required to send you a 1099-INT form, but the tax law requires reporting all income. That said, for very small amounts like $4, while you're supposed to report it, the tax impact would be minimal (less than a dollar) and the IRS isn't likely to flag your return over such a small amount. Just remember that as your savings grow, your interest will too, and it's good to understand the reporting requirements now.

Does it work for other types of investment income too? I have some dividend-paying stocks and a small amount in a money market account.

How does this compare to just using TurboTax or something? Is it worth paying for a separate service just for this?

Yes, it absolutely works for all types of investment income! It handled my dividend statements (1099-DIV) and even some cryptocurrency stuff I had. I think it can process pretty much any tax document. As for comparing to TurboTax, it's actually different because it focuses specifically on analyzing your tax documents and explaining them in plain language before you even start filing. It helped me understand what I was looking at first, then I used that knowledge when I did my actual filing. For me, understanding what all the numbers meant before plugging them into tax software was super helpful.

How does this actually work? I thought the IRS phone lines were just permanently jammed. Do they have some special connection or something?

Yeah right. No way this actually works. I've tried calling the IRS like 10 times this month and literally could not get through. Sounds like a scam to me.

It works by essentially doing the waiting for you. They have a system that dials and navigates the IRS phone tree, waits on hold, and then calls you when they've got an actual person on the line. It's basically like having someone wait on hold for you so you don't have to sit there for hours. Not a scam at all - I was super skeptical too! It basically just saves you from the frustration of waiting on hold forever. They don't ask for any personal tax info or anything sketchy like that. They just connect you directly with the IRS once they get through.

Thanks, that's really good to know! Can I just move my existing savings directly into a Roth IRA? And do banks offer these or do I need to go somewhere special?

You can definitely move your savings into a Roth IRA, but there are annual contribution limits ($6,000 for 2025 if you're under 50). Your regular bank might offer them, but typically people open them with investment companies like Vanguard, Fidelity, or Charles Schwab. The advantage is that in a Roth IRA, you can invest in things that potentially grow much faster than a savings account - like index funds that might return 7-10% annually compared to the 1-2% you'd get from a high-yield savings account. Just remember that while you can withdraw contributions anytime, you generally can't touch the earnings until retirement age without penalties.

Any specific recommendations for good high yield accounts? I hear ads for them all the time but not sure which ones are legit.