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Download of tax exempt interest and dividends from broker into traditional IRA results in taxable ca

Thomas Goodhart
Thomas Goodhart Member ✭✭
edited January 2019 in Investing (Windows)

I have a few traditional IRA's that have the Tax deferred YES checked.  Whenever interest/Dividend transactions are downloaded from Merrill Lynch, all of the ones that ML has marked as "Tax Exempt" (which is all of them) come into Quicken 2017 Deluxe as _IntInc or _DivInc not _IntTaxFree or _DivIncTaxFree.   This screws up the Tax reports and shows the as taxable income when they are not.   The only work around that I have found is to Edit each transaction and move the amount from Dividend or Interest box to the Misc Income box and then Q allows me to change the category to the appropriate tax free one.   Is this a know problem with Quicken or what?  It takes time to do all this editing every month-end on 4-5 IRA accounts.

Comments

  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    edited November 2018
    The _Inttaxfree and Divinctaxfree categories are for tax exempt securities like municipal bonds. To keep the interest and dividend income in your ira accounts out of the tax reports, make sure these accounts are not selected in the report customization.
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  • Jerry_
    Jerry_ Member ✭✭✭✭
    edited May 2018
    Thomas, I would follow Jim's advice.

    Just for informational purposes only, Yes there is a known Bug in budgeting the Tax-free investment categories; particularly in the monthly (graph-bar) view.

    You might be interested in viewing this link:
    https://getsatisfaction.com/quickencommunity/topics/budgeting-with-divinctaxfree-and-intinctaxfree-c...
    Now running the 2019 Windows Subscription Plan
    Retired - former Computer System Analyst
  • Thomas Goodhart
    Thomas Goodhart Member ✭✭
    edited January 2019

    Jerry,

    I can do what Jim suggested, but that doesn't really fix the issue.  There are Financial Advisory fees on these IRAs that I want to see on tax reports that go on Schedule A.  Also, occasionally there is a dividend that is not marked tax-exempt by Merrill Lynch.   Another annoyance is foreign dividends on a foreign stock always get miscategorized as regular dividends by Quicken.  Reinvested dividends show on the ML statement as 1. tax exempt dividend adding to cash balamce. 2. Shares Added and 3. Cash Withdrawal.  to keep the register size smaller, I've been changing the Added Shares to Buy Shares and delete the misc. cash withdrawal.

    These dividends on stocks and mutual funds in the tax-exempt IRA don't get taxed until I make a distribution.  (I am under 70.5 and taking small distributions from IRA, monthly and having tax withheld).

    I looked at the link you provided and saw your workaround.  That's what I've been doing.  I made my own categories for _ST CapGnDstTaxFree, _LT CapGnDstTaxFree, _FgnDivTaxFree etc. as that's what my ML statements show.  I just wondered why Quicken can't look at the "Tax Defered=YES" switch on the account and treat all interest/dividend income as tax-free.

    I pretty much quit relying on the investment part of Tax Schedule and Tax Summary and just import everything from ML into TurboTax.

  • J_Mike
    J_Mike SuperUser ✭✭✭✭✭
    edited March 2018

    Jerry,

    I can do what Jim suggested, but that doesn't really fix the issue.  There are Financial Advisory fees on these IRAs that I want to see on tax reports that go on Schedule A.  Also, occasionally there is a dividend that is not marked tax-exempt by Merrill Lynch.   Another annoyance is foreign dividends on a foreign stock always get miscategorized as regular dividends by Quicken.  Reinvested dividends show on the ML statement as 1. tax exempt dividend adding to cash balamce. 2. Shares Added and 3. Cash Withdrawal.  to keep the register size smaller, I've been changing the Added Shares to Buy Shares and delete the misc. cash withdrawal.

    These dividends on stocks and mutual funds in the tax-exempt IRA don't get taxed until I make a distribution.  (I am under 70.5 and taking small distributions from IRA, monthly and having tax withheld).

    I looked at the link you provided and saw your workaround.  That's what I've been doing.  I made my own categories for _ST CapGnDstTaxFree, _LT CapGnDstTaxFree, _FgnDivTaxFree etc. as that's what my ML statements show.  I just wondered why Quicken can't look at the "Tax Defered=YES" switch on the account and treat all interest/dividend income as tax-free.

    I pretty much quit relying on the investment part of Tax Schedule and Tax Summary and just import everything from ML into TurboTax.

     There are Financial Advisory fees on these IRAs that I want to see on tax reports that go on Schedule A.
    I would strongly suggest that you review this with your professional tax advisor - or at least consult the IRS rules & regs. Fees paid with funds from a tax deferred retirement account are not deductible.

    As an aside - starting with TY2018, I understand  that advisor fees paid from taxable accounts are no longer deductible.
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  • markus1957
    markus1957 SuperUser, Windows Beta Beta
    edited March 2018

    Jerry,

    I can do what Jim suggested, but that doesn't really fix the issue.  There are Financial Advisory fees on these IRAs that I want to see on tax reports that go on Schedule A.  Also, occasionally there is a dividend that is not marked tax-exempt by Merrill Lynch.   Another annoyance is foreign dividends on a foreign stock always get miscategorized as regular dividends by Quicken.  Reinvested dividends show on the ML statement as 1. tax exempt dividend adding to cash balamce. 2. Shares Added and 3. Cash Withdrawal.  to keep the register size smaller, I've been changing the Added Shares to Buy Shares and delete the misc. cash withdrawal.

    These dividends on stocks and mutual funds in the tax-exempt IRA don't get taxed until I make a distribution.  (I am under 70.5 and taking small distributions from IRA, monthly and having tax withheld).

    I looked at the link you provided and saw your workaround.  That's what I've been doing.  I made my own categories for _ST CapGnDstTaxFree, _LT CapGnDstTaxFree, _FgnDivTaxFree etc. as that's what my ML statements show.  I just wondered why Quicken can't look at the "Tax Defered=YES" switch on the account and treat all interest/dividend income as tax-free.

    I pretty much quit relying on the investment part of Tax Schedule and Tax Summary and just import everything from ML into TurboTax.

    JM- you are correct. Also, fees associated with tax-exempt income like municipal bonds were never deductible. The OP is seriously confusing tax-exempt and tax-deferred.
  • Thomas Goodhart
    Thomas Goodhart Member ✭✭
    edited March 2018

    I have talked to my financial advisor. For advisory fees, I only claim on taxes what ML says on the year end tax documents.  I understand the difference between tax-exempt and tax-deferred.  I know that dividends paid in 2017 in an IRA are not taxed on 2017 taxes, but when that money is withdrawn in a distribution later, then the taxes are owed at that time.

This discussion has been closed.