Contributing MTurk income to Roth IRA

ZZTurker

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I'm currently trying to use MTurk to supplement my income so that this year I can successfully hit the $6000 Roth IRA contribution limit. I have a lot of questions, and any answers or guidance would be much appreciated (also, is there any way to search posts?)!
  • I made $150 last year on MTurk (just started in December), can I put that income in my Roth IRA even though it's below the $400 tax threshold?
  • When can I put my MTurk income into my Roth IRA? Can I do it as soon as it lands in my bank account? Or do I have to wait to pay taxes on it first? For example, once I cash in the $150 from last year, can I put it into my Roth IRA right away?
  • Let's say I made $5000 this year on MTurk and I have $300 in taxes. Do I get to contribute $5000 to my Roth IRA, or can I only put in the $4700 after taxes into the Roth IRA?
  • If I made money in one calendar year and cash out the next, does that income count as income for the year I made it in or income for the year I received it in? For example, if I cash out the $150 I made last year in a week, does that count as earnings for 2020 or 2021?
I'd be happy to clarify any of the questions if needed. Thanks for your time!
 

jeepjeep

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I'm not a tax expert nor financial professional, so you should consult with someone before making any financial choices.

That aside, you can contribute any earned income into a Roth IRA. If you made $1 you can put $1 into the roth. This is the same for the next $5,999.

There is some nuance, but income is typically considered earned for taxes purposes on the data you performed the work to earn said income. So for example, you have have worked somewhere on 12/31/2020, but you didn't get the paycheck until the next week, that's still 2020 income. So technically, for mturk, you earned the income on the date you completed the HIT, but there may be some matter of debate, and honestly at these amounts, the IRS isn't going to care as long as contributions <= min( total wages, $6,000)

To your specific situation, the $150 from last year could have all went into a Roth for 2020. It is too late to do that now that the tax filing deadline has passed.

If you made $5,000 this year, all $5,000 can go in. You can contribute up to the IRS maximum any time until you file your 2021 taxes next year (typically April 15th, but this varies). You could contribute all $5,000 right now, but if you earn less than $5,000 from all wages, you will need to withdrawal the excess, which typically will involve penalties, so be careful if you think you will earn less than the IRS maximum (I think it is now $6,000)