IRA Account: Withdraw vs Xout -RMD vs. Trustee transfer

andyc3

I use Quicken H&B 2015 on Win10. I have a Fidelity IRA and a Citibank brokerage IRA. To record correctly an RMD from my Fidelity IRA, the best practice says to use a transaction type of Xout; this carries the expectation that I set the tax attribute for 1099-R:Total IRA taxable distrib. This works. However, I seem also to need Xout to record any non-taxable trustee-to-trustee transfers between the Fidelity IRA and the Citibank IRA. This asks the same action type of be both taxable and non-taxable at the same time.

Fidelity WebEx Connect transaction downloads associate the RMD funds removal with a "Withdrawal" action type.  Is there any issue with using "Withdrawal" as the action for RMD cash removal (setting the tax type as above) and using Xout only for trustee transfers (with no tax type)? In other words, should I switch the RMD accounting to use "Withdrawal" action type and reserve Xout action type for trustee transfers? Is there any reporting or other downside to this approach?

The action type to "transfer shares between accounts" doesn't really pertain in my circumstance, though it seems a natural choice, since the cash account "shares" are different at Fidelity and at Citibank and the transfer actually occurs as cash. If I need to use Xout for the RMD cash removal, how do I handle the action type for trustee transfers?

andy

J_Mike

I will try to answer your questions by summarizing what I have observed with QWin.

I am assuming that your desire is to have QWins tax reports properly reflect the tax implications (if any) of various cash movements.

Cash transferred from one IRA to another IRA has no tax implications. The tax reports will not include such transactions since, by default, both tax deferred accounts are excluded from the reports. Thus the Action chosen has no bearing.

Cash transferred from an IRA to a Cash Account (checking, savings, etc) is taxable and will be picked up by the tax reports. One can initiate the transfer from either account. Again, the Action has no bearing on the tax report results.

The action to be careful with is cash transferred from an IRA to a taxable Brokerage Account - a taxable event.
To get proper tax reporting, one must go to the destination account (the taxable brokerage acct).
Under Enter Transactions, scroll down to Cash Transactions > Deposit - this is a critical point to get proper tax reporting.
Complete the entry, including indication in the Category field that this is a transfer from the IRA.
Note that one can initiate the transfer starting in the source account but it is not picked up in the tax reports. Again, the critical point is using the Deposit transaction.
Also note - I do not have an explanation for this behavior nor is it documented. It is simply something I stumbled onto while trying to handle my own retirement distributions.

q_lurker

I would be looking at making an IRA-to-IRA transfer of cash as a transfer of MM shares instead using the Shares Transferred approach. That should bypass the tax attribute dilemma. 

Patrick Murray Sr.

In following the above instructions, destination account, deposit. I entered the category field but then asks for the Payee.  Who is the Payee?

volvogirl

Patrick Murray Sr. said:

In following the above instructions, destination account, deposit. I entered the category field but then asks for the Payee.  Who is the Payee?

Payee is just a description line. You could put in anything. Like I would put Transfer to IRA etc.

dsttexas

JM said:

I will try to answer your questions by summarizing what I have observed with QWin.

I am assuming that your desire is to have QWins tax reports properly reflect the tax implications (if any) of various cash movements.

Cash transferred from one IRA to another IRA has no tax implications. The tax reports will not include such transactions since, by default, both tax deferred accounts are excluded from the reports. Thus the Action chosen has no bearing.

Cash transferred from an IRA to a Cash Account (checking, savings, etc) is taxable and will be picked up by the tax reports. One can initiate the transfer from either account. Again, the Action has no bearing on the tax report results.

The action to be careful with is cash transferred from an IRA to a taxable Brokerage Account - a taxable event.
To get proper tax reporting, one must go to the destination account (the taxable brokerage acct).
Under Enter Transactions, scroll down to Cash Transactions > Deposit - this is a critical point to get proper tax reporting.
Complete the entry, including indication in the Category field that this is a transfer from the IRA.
Note that one can initiate the transfer starting in the source account but it is not picked up in the tax reports. Again, the critical point is using the Deposit transaction.
Also note - I do not have an explanation for this behavior nor is it documented. It is simply something I stumbled onto while trying to handle my own retirement distributions.

I see Quicken Support now has an explanation for this also: https://www.quicken.com/support/ira-transfers-fail-appear-tax-reports