Hey guys, just a couple quick logistical questions. I’ve been using Robinhood for about a year and have invested in several dividend stocks. I use the dividend payments to buy more shares of companies. I don’t have to ever pay taxes on the dividends since the money is staying within the app correct? I haven’t taken any money back into my bank account so I don’t see why anything would have to be reported. Also, I was wondering if at any point I wanted to move the money in my Robinhood into something like a Roth IRA retirement account, would I be able to seamlessly do that without facing any penalties? Thanks in advance for the help!
Jake Blanchard: No you pay taxes on the div
Bob Gould: Correct
Bob Gould: You should be getting a 1099div from the brokerage.
Bryan Mathews: But how does the IRS know I’ve gotten any dividends if I haven’t withdrawn any money from the app to my bank account?
Jake Blanchard: Your broker reports to the IRS
Bob Gould: Yeah, don’t try to pull a fast one on the IRS.
Jake Blanchard: They don’t care about your bank account or what you do with it
Fred Wong: I’ve been taxed on my dividends year after year even if I reinvest in it.
Terry Row: Robinhood sends a 1099 to you and the IRS. You should be getting a message shortly that it’s available for you.
Nandy Colon: Jake Blanchard right on
Bob Higgins: Yes Terry is right!!
Wade Yandell: You pay taxes on divs regardless of what you “do” with them if they’re in a non tax sheltered account.
Bob Gould: It’s income, taxable.
Robert Bartlett: Taxable and you should receive a 1099-DIV for tax purposes
David Linnell: Get in a Roth IRA
Bryan Mathews: You need to be employed or married to open one right? I’m a student currently and won’t have a real salary until I become a physician which is years down the line.
David Linnell: You need income equal to the amount to put in up to 5500.
Umesh Mirani: That’s why you should have DRIP, you don’t get taxed there. RH does not have drip ofcourse. I use fidelity for dividend payers and rest in fidelity.
Ryan Brabson: I don’t use Robinhood, but yes, you pay taxes. Robinhood should have a 1099 div form in thier tax center. They trasmitted that same form to the IRS. So the IRS does know you owe taxes. Robinhood is required by law to send you and the IRS a 1099.
Bob Gould: Even The Beatles knew…
Bob Hawley: If you never cashed a check from your employer would you still have to pay tax on it. Same deal your employer has to report your earnings.
Ralph Al: You drip you pay taxes also
Brad Schumann: yeah, no
David Linnell: And for your second question. You cannot directly transfer stock from a taxable account into a Roth IRA. Roth contributions are made using after tax dollars.You would need to first sell the stock in the taxable account and then you could transfer the cash proceeds to your Roth IRA account.
Thanh Bui: if you ever read warren buffets reply to shareholders why his stock does not pay a dividend, this is why. to avoid taxes and it allows him to reinvest it internally instead of paying shareholders and they reinvest it (and get taxed). You will only have to pay taxes on his stock if you sell.
Phyllis Reisman: When a company pays a dividend in cash it is taxable. If you reinvest the dividend back into the security it is not considered taxable income until you sell the shares. Reinvesting your dividends (buying more shares) builds up your equity…usually a good idea.
Jake Blanchard: From your ref link:”Reinvesting dividends is the process of automatically using cash dividends to purchase additional stocks of the same company. If you choose to reinvest your dividends, you still have to pay taxes as though you actually received the cash…
Dtone Fowler: Jake Blanchard exactly but at a lower “qualified div” rate
Michael Mast: Dtone Fowler Exactly, dividends are not taxed as capital gains (the selling of stock).
Jake Blanchard: correct unless you’re on your employers plan and they let you invest below FMV..then i think there’s something for that too
Rich Krohley: Best way I can sum up your situation is let’s assume you’re not a doctor or medical professional. However, you’re very ill and know you need medicine to cure yourself. You then find a blank prescription on the floor. Instead of going to a doctor or hospital, you decide to go on WebMD and try to self diagnose yourself and forge a signature in the prescription. Go to a financial professional who can help you while you’re focusing on medical school. Look for a financial planner who can help you. Someone who gets paid by you for the advice they give you. Not someone who gets paid only if they sell you a product.
Pedro Lopez: Bryan one of best advise I was given is to take a tax course. I took one with HR Block. It takes you to a New Level.