How do taxes work with Robinhood Roth IRA contributions? When and how are they paid?

14 The confusion is totally understandable! With a Roth IRA, you're contributing "post-tax" money, but that doesn't mean Robinhood or any brokerage deducts taxes when you deposit. Here's how it works: The money you're depositing ($400) has already been taxed as part of your regular income. When you get your paycheck, taxes were already withheld. So the $400 you put in your Roth IRA is money you've already paid taxes on - that's why you see the full amount in your account. The tax benefit comes later - when you withdraw in retirement, you won't pay any taxes on that $400 OR on any growth/earnings it generates over time (assuming you follow the withdrawal rules). That's different from Traditional IRAs where you get a tax deduction now but pay taxes when you withdraw. No additional action needed regarding taxes for your Roth contribution - you're good to go! Just make sure you don't exceed the annual contribution limit ($6,500 for 2023 if you're under 50).

7 I had the same confusion when I started my Roth IRA journey! I found this amazing tool that helps analyze and explain retirement accounts called taxr.ai (https://taxr.ai). It totally cleared up my confusion about how Roth IRAs work tax-wise. What's cool is you can upload your statements and it breaks down exactly what's happening with your contributions, growth, and future tax implications. It helped me understand that with Roth IRAs, I'm using money that's already been taxed (like from my regular paycheck) to fund the account. The visualizations showing how my money grows tax-free over time really helped it click for me. It also has calculators to compare Roth vs Traditional and figure out contribution limits based on your income.

11 Just wanted to follow up about my experience with taxr.ai after trying it out. It was seriously helpful for figuring out my Roth IRA situation. I was right at the edge of the income phase-out for 2023, and it calculated exactly how much I could contribute ($3,420 instead of the full $6,500). The tool also showed me how to track my basis (the amount I've contributed after tax) which will be important if I ever need to make withdrawals. I like how it explained everything in plain language instead of confusing tax jargon. Definitely helped clear up the same questions I had about when/how the taxes are paid with Roth accounts. Turns out it's much simpler than I thought!

6 If you're confused about Roth IRAs (I was too!) and want to talk to an actual IRS agent to confirm you're doing everything right, check out Claimyr (https://claimyr.com). I spent HOURS trying to get through to the IRS on my own with no luck, but they got me connected in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had questions about contribution limits and whether I needed to report anything on my tax return. The IRS agent confirmed what others here said - the money going into your Roth has already been taxed through normal income tax, and you don't need to report contributions on your return unless you're claiming the Saver's Credit. The peace of mind from getting official confirmation directly from the IRS was totally worth it.

18 Well, I feel pretty stupid now. I was absolutely convinced Claimyr was going to be a waste of money, but after trying to call the IRS myself 5 TIMES and never getting through, I broke down and tried it. Got connected to an IRS agent in under 20 minutes. The agent confirmed everything about my Roth IRA questions and even helped me understand some form I need to file since I did a rollover this year (Form 8606). I had to eat my words but honestly, I'm just relieved to have my questions answered officially. Sometimes the "government service" just isn't accessible without help, and waiting on hold for hours wasn't an option with my work schedule.

3 One thing to watch out for with Roth IRAs that nobody mentioned yet - if your income increases significantly in the future, you might phase out of eligibility to contribute. The income limits for 2023 start phasing out at $138,000 for single filers and $218,000 for married filing jointly. If your income goes above the limits, look into the "backdoor Roth" strategy where you contribute to a Traditional IRA (which has no income limits) and then convert it to a Roth. Also, don't forget you can still contribute for 2023 until April 15, 2024!

21 Has anyone here used Robinhood specifically for their Roth IRA? I'm trying to decide between them, Fidelity, and Vanguard. Are there any downsides to Robinhood for retirement accounts that I should know about?

Great question! I was in the exact same boat when I started my Roth IRA. The key thing to understand is that "post-tax" doesn't mean the brokerage takes taxes out - it means you're using money that's already been taxed. Think of it this way: when you get your paycheck, taxes are already withheld by your employer. So that $400 you deposited has already had income tax paid on it. That's why you see the full amount in your account ready to invest. The beauty of a Roth IRA is that since you've already paid taxes on this money, when you withdraw it in retirement (after age 59½ and the account has been open for 5+ years), you won't pay any taxes on the original contributions OR the growth. No action needed on your part for taxes right now - just invest that $400 and let it grow tax-free! The only thing to watch is not exceeding the annual contribution limits ($6,500 for 2023 if you're under 50).