FAQ: Best way to handle distributions from IRA

Ed SowellEd Sowell Member
edited January 12 in FAQs
Recently started with RMD from my IRA, with the withdrawals taken from a MM fund. After withholding for state & federal taxes, the net is transferred to a non-IRA MM acount at the same investment company. For each withdrawal 2 transactions are downloaded to Quicken 2010 from my investment company: the total shows up as a normal withdrawal from the IRA MM account, and the net amount as deposit in the non-IRA MM account. The problem with doing it this way is that Quicken has nothing reflecting the Income or withholding as it would if I had received the distribution as a paycheck.

What's the best way of handling this? The method I can think of requires deleting the downloaded transactions each month and create some new ones that will keep the Quicken IRA and nonIRA in agreement with the paper statements, but also mimic a paycheck, so to speak. Is there a better way?

TIA

Comments

  • J_MikeJ_Mike SuperUser
    edited January 22
    Summarizing - you want QWin to record a transfer of the gross distribution from the IRA to the MM Acct (a taxable brokerage acct) and record the fed & state withholding. And you want QWin to track/report the taxable income and the taxes withheld in the tax reports.

    Set the tax attribute "Transfers Out:" for the IRA account to "1099-R:Total IRA taxable distrib."
    Go to the destination account - the MM Acct.
    Enter a Deposit transaction - scroll down to the Cash Transactions at the end of the transaction list to find Deposit.
    Select Split in the transaction window and record 3 split entries;
    The first split is the gross distribution with the category indicating a transfer from the IRA Acct.
    The second and third entries are the fed & state withholdings - with appropriate categories.
    The net of this transaction is the net deposit to the MM Acct.
    Schedule this transaction for your monthly distributions.

    You will want to enter these transactions into the register prior to downloading from your FI.
    The downloaded transactions from your FI may or may not match the register entries - try to manually match if auto match fails. [Matching in investment accounts seems a bit strange at times].
    If you can not get a match, I would delete the downloaded transactions.

    Couple of important points:
    1) The withholdings must be recorded in a taxable account in order for QWin to pick them up in the tax reports - they must be outside the 'tax-deferred' shield of the IRA.
    2) You can create categories for the fed & state w/h - use the corresponding 1099-R tax line assignments for these
    3) It is important to use the Deposit transaction when transferring to a taxable brokerage acct. QWin does not pick up the taxable event [the distribution] if one uses a 'Cash transferred out' transaction for some reason [bug?].
    4) If the destination account is a cash account (checking or savings) - just open a regular split transaction (in the destination acct) and record the transfer from the IRA and the withholdings.
    5) Check for proper tax reporting by running QWins Tax Schedule Report - look for the 1099-R sub-header.6) The procedure is exactly the same for distributions from any tax-deferred retirement account (IRA, 401k, other). The tax line assignments are the same - note they all refer to 'IRA' - but work the same for a 401k or other.
    QWin & QMac (Deluxe) Subscription User
  • Ed SowellEd Sowell Member
    edited February 3

    JM,
    Thanks. Just getting back to this.

    Correct me if I'm wrong, but don't I have to also execute a Sell transaction in the IRA? Otherwaise, the cash balance goes negative when I do the deposit. And it seems that I'll have to do a Buy in the Non-IRA account to keep the cash balance at 0.

    Maybe I wasn't clear on what I'm doing. The distribution is from a MM fund in my IRA and the net amount goes into a MM fund in my non-IRA.

    Ed

  • J_MikeJ_Mike SuperUser
    edited December 2018
    "Correct me if I'm wrong, but don't I have to also execute a Sell transaction in the IRA? Otherwise, the cash balance goes negative when I do the deposit. And it seems that I'll have to do a Buy in the Non-IRA account to keep the cash balance at 0."

    You've got it!
    QWin & QMac (Deluxe) Subscription User
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