QWin prompt: Is this a retirement distribution from your 401k?

JoeBlow

I'm taking an 59.5 inservice withdrawal from a 401k and rolling it directly to a traditional IRA. The 401k trustee liquidated multiple funds and is transferring the cash directly to the recipient IRA as a lump sum.

When I create the XFER to the IRA in Quicken, I'm prompted with the question above. How do I answer it? Yes, it's a distribution, but not in the sense that it's a taxable event.

Sherlock

The correct answer is: No.

If you would like to avoid the query and the resulting ContribX transaction, I suggest you transfer the funds as a security (for example, a money market fund).

Sherlock

JoeBlow said:

Transferring securities is not an option. That is controlled by the 401k trustee. They already sold it. I guess i could transfer a dummy MMF but I'm not trying to avoid the prompt. I just want to know what it means.

My real question is, what is the effect of a yes or no answer to the prompt? Does one record hidden tax implication transactions, and the other doesn't? Does something else happen?

Thanks

To answer your real question: The effect of a yes answer is that a self-referencing MiscIncX transaction will be added to the special hidden built-in Tax Impact of 401(k) accounts account so that the distribution will be reported as taxable income with an _401Withdrawal category.  The effect of answering no is that the self-referencing MiscIncX transaction will not be added to the special hidden built-in Tax Impact of 401(k) accounts account so that the distribution will be reported as taxable income with an _401Withdrawal category. 

So, yes, one records a hidden tax implication transaction and the other doesn't.

And, no, the response to the prompt doesn't cause something else to happen.

q_lurker

With respect to QWin methodologies, I would suggest you transfer the securities and sell them in the new account rather than transferring the cash.  I believe that will bypass the question. 

A parallel method is to but MM funds with the cash (real or fake fund), transfer that asset then sell the MM in the new account 

Most commonly I recommend those techniques to bypass the question as to whether the addition of cash into the IRA is a calendar year contribution.  I am suspecting the same base behind your cited prompt.  

Sherlock

The correct answer is: No.

If you would like to avoid the query and the resulting ContribX transaction, I suggest you transfer the funds as a security (for example, a money market fund).

JoeBlow

Transferring securities is not an option. That is controlled by the 401k trustee. They already sold it. I guess i could transfer a dummy MMF but I'm not trying to avoid the prompt. I just want to know what it means.

My real question is, what is the effect of a yes or no answer to the prompt? Does one record hidden tax implication transactions, and the other doesn't? Does something else happen?

Thanks

JoeBlow

> ... to bypass the question as to whether the addition of cash into the IRA is a calendar year contribution.

The prompt is not asking whether it's a calendar year contribution TO the IRA. Rather, it's asking whether it's a distribution FROM the 401k.

Sherlock

JoeBlow said:

Transferring securities is not an option. That is controlled by the 401k trustee. They already sold it. I guess i could transfer a dummy MMF but I'm not trying to avoid the prompt. I just want to know what it means.

My real question is, what is the effect of a yes or no answer to the prompt? Does one record hidden tax implication transactions, and the other doesn't? Does something else happen?

Thanks

To answer your real question: The effect of a yes answer is that a self-referencing MiscIncX transaction will be added to the special hidden built-in Tax Impact of 401(k) accounts account so that the distribution will be reported as taxable income with an _401Withdrawal category.  The effect of answering no is that the self-referencing MiscIncX transaction will not be added to the special hidden built-in Tax Impact of 401(k) accounts account so that the distribution will be reported as taxable income with an _401Withdrawal category. 

So, yes, one records a hidden tax implication transaction and the other doesn't.

And, no, the response to the prompt doesn't cause something else to happen.

JoeBlow

Thanks for the tax impact information. I now have the knowledge I need to record the transactions accurately.