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New tIRA received bonus $ before backdoor rIRA - legal?

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  • New tIRA received bonus $ before backdoor rIRA - legal?

    I opened a new traditional IRA account at E*TRADE and made contributions for 2019 (late) and 2020 with the intention to do a backdoor Roth IRA. Because I contributed $12k, E*TRADE has a promotion where they give you $100. So now the balance is $12,100. Now I'm not one to turn down free money but is this legal since now there is more than the max contribution there? It seems this is different than just "earned interest" since it was actually deposited by the broker. My plan is just to convert it all to the Roth IRA and pay the tax on the extra $100, but wanted to make sure of the legality of this "extra contribution".

    Thanks for any help!

  • #2
    Just convert all. The bonus is treated as earnings. Not contribution.


    • #3
      What you should have done was do the $12k backdoor Roth at Vanguard or where ever. Then rollover the Roth to E*TRADE. Then they would have made the deposit to the Roth. Zero tax due. Call that your ($100 X tax rate) education penalty.


      • #4
        Great, thank you!
        I appreciate the explanation of that better alternative approach - the education penalty definitely got me this time.