Improve handling of IRA distributions, including QCDs and Roth conversions

h stansfield

I find myself in the same situation in 2023, it's still pretty clunky. In my case, Vanguard does not do a single withdrawal transaction to my bank, it does a separate transaction for each fund holding. So, if my automatic transaction in Vanguard is to sell X dollars from funds A, B, C, within the same account, and withhold taxes and transfer to the bank….I get three transfers to the bank, not one, which just makes it ever more confusing.

So, for those who have created reminders for the bank deposits in these situations, do you do it as a paycheck, a miscellaneous income reminder, or a transfer reminder? And then do you split out the taxes in the reminder? I'm just getting started with this—and I wish it was more streamlined.

Boatnmaniac

https://community.quicken.com/discussion/comment/20391443#Comment_20391443

I set up my IRA distributions to checking as Deposit Reminders in my checking account. Click on the "V" at the bottom of the following picture link to expand it and see the step-by-step process for how I do it. It is the same process as what several others have posted here in this thread and is considered by many to be the best method to manage IRA withdrawals so they get properly captured in the Tax Reports and Tax Planner.:

https://community.quicken.com/discussion/comment/20319145#Comment_20319145

Since you have 3 different transfers you will want to have 3 different Deposit Reminders. You might find it helpful to make them somehow different from each other, such as different net deposit dollar amounts or different transaction dates. By doing this Quicken will be able to properly match the downloaded deposits to your checking account to the correct RMD Deposit Reminder transaction.

Jim_Harman

You could handle this by telling Vanguard to sell the securities and keep the cash in the settlement account, then a few days later transfer the cash to your checking account with the taxes withheld.

In Quicken you would use a split Deposit Reminder in the checking account, with one line as a transfer for the total amount of the sales and separate lines for the Federal and any other withholding. The withholding amounts are entered as negative numbers in the split, so the net amount is the amount deposited.

In the IRA account, make sure the tax Schedule for transfers out to is set to "1099R: Total IRA taxable distrib."

h stansfield

Thanks Guys! I'm fortunate to live in PA, where retirement distributions are not taxed at the state level.

rw5337

+1 to the original post.

idahohoho

I have begun making QCDs also and would like a clean way to track these IRA withdrawals in Quicken Premier Classic for Macintosh, and show the transactions in Quicken Reports.

cruciverbalist

Clearly there is a need for a macro or other means to handle IRA RMDs.

The macro should include at least the total amount of RMD, Federal withholding, State withholding, QCDs and then the final amount.

Each year I struggle with how to make this work, inventing dummy transactions, all of which screw up the year end tally for my accountant. I accept that Quicken is accounting software, and not a tax program, but Quicken does purport to enable users to make reasonable transactions reasonably simply. An RMD seems like a reasonable transaction to me.

Reading through the voluminous other comments dating way back, I would hope that Quicken would resolve this. As other commentators have said, many users of Quicken are aging up; thus, this is going to be a more frequent problem. A tech note would help at least.

Quicken? Are you listening?

Thanks.

rhb2

I see no easy way to do this. For all of us millions of seniors living on withdrawals from our IRAs this makes the QUicken Tax Planner worthless. The suggestions in the community are worthless. For one thing what is an attribute? How does a transaction have an attribute. If I use 'Cash Transferred out of an account" it appears as WithdrawX and Quicken Help says this is not a recognized term in Quicken!

CMRater

Has quicken acknowledged this problem There are work arounds, but there should be a more software driven friendly solution. It's even worse with a Roth Conversion event.

Jim_Harman

This Idea is now classified as Planned. That means we should see something implemented eventually; we will have to wait and see to find out what and when.

Rocket J Squirrel

https://community.quicken.com/discussion/comment/20401526#Comment_20401526

Read - and bookmark - the FAQ I have linked below. Due to an unexplained "quirk" in QWin, "Cash transferred out" is the wrong way to perform a taxable IRA distribution. The distribution must be taken in the receiving account as a DEPOSIT transaction. It works and Tax Planner sees it. You can use "Cash out" for a non-taxable IRA withdrawal.

https://community.quicken.com/discussion/comment/17093491#Comment_17093491

Chris_QPW

@Rocket J Squirrel said:

Due to an unexplained "quirk" in QWin, "Cash transferred out" is the wrong way to perform a taxable IRA distribution.

Personally, I think it "explained". The account is marked "tax deferred" as such no "tax reporting" is done in it. The only exception being that you can specify one tax line for the amount being withdrawn, but that is actually "outside" of the account.

One might say then why is it possible to put in a split Withdraw with these tax lines, and I would say that it because it is a generic dialog/pulldown menu that would be overly complicated by having rules that say that a given category can't be used if the account type is tax deferred.

In the tax reports if you select to include the IRA account it will include these tax amounts (these accounts aren't selected by default) (in the W-2 section of the Tax Schedule for instance).

But the tax planner doesn't allow for selecting accounts, it works with the "defaults", so this doesn't show up in those accounts.

bajohnson_47

re: "Make sure the IRA/401K account has the correct tax line item associated with it:  Account Details > Tax Schedule button > Transfers Out = 1099-R:Total IRA taxable distrib. > OK.  (It seems that often times the default for Transfers Out = 1099-R:Total IRA gross distrib."

First: The "1099-R:Total IRA gross distrib" for Transfers Out is used when you are moving IRA funds from one IRA account to another, which is a non-taxable event.

Second: Ps56k2 recommended and I have used what follows. You will know you are following the correct taxable procedure if you are required to select the year that this IRA RMD/transfer is for.

https://community.quicken.com/discussion/7902500/recording-rmd-transactions
• Quicken IRA and RMD transaction

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:

• 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.

• You can create categories for the fed & state w/h - use the corresponding 1099-R tax line assignments for these

• 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?].

• 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.

• Check for proper tax reporting by running QWins Tax Schedule Report -
  look for the 1099-R sub-header.

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.

Carol Rigdon

I am using Quicken to budget my post retirement income. As I refine my budget I have run into the similar issues as described by others. The broker transfers funds monthly from my IRA into my spending account but withholds federal income tax separately. However, the tax amount is not 'transferred' into one of my accounts so it is a bit problematic as to how to properly categorize so that data is ready at tax time.

I don't think it should depend on the 'demographic' as to whether instructions are clear as to how to transfer tax data properly from Quicken into Turbo.

The instructions could provide options, such as, if your broker withholds tax, do this, If you file quarterly payments and want the cash available when the payment is due and want to track your tax payments then do this ….

Jim_Harman

While we are waiting for Quicken to implement a simpler procedure for properly tracking distributions from IRAs and other tax deferred accounts, here is a "Cheat sheet" for the current versions of Quicken:

In the IRA, click on the gear at the top right and select Edit account details. Click on Tax Schedule and set Transfers out to 1099R: Total IRA taxable distrib., like this:

For the taxes to be recorded properly in Quicken, the transfer must be entered as a Deposit transaction in the receiving account. It can be a banking or an investing account, but it must be a taxable account, not another IRA for example. If there is already an Xout transaction in the IRA account that transfers money to the taxable account, note the amount and delete it before entering the Deposit. Do not try to edit the receiving end of the transfer.

In the receiving account:

1)  Enter a Deposit transaction for the net amount of the RMD as a positive number.

2)  Split the category:

• Line 1 of the split:  Category =  the IRA account name in [square brackets] and the gross distribution amount, a positive number.
• Line 2 of the split:  Category = the Fed taxes withholding category that you use, a negative number.
• Line 3 of the split:  Category = the State taxes category that you use, a negative number.
• Total of the split:  Must equal the net amount of the deposit.

If you receive the distributions regularly, you can set this transaction up as an Income Reminder.

In the IRA account:  Delete any downloaded brokerage transactions for

• The net distribution
• The Fed taxes withheld
• The State taxes withheld

With this setup, the taxable income will be shown in the “1099-R Total IRA Taxable distrib.” and the tax withholding in the withholding sections of the Tax Schedule report. The correct amounts will also show in the corresponding sections of the Tax Planner. 

BK

Thank you Thank you @Jim_Harman

A excellent write up. Question: What about the "Transfers in" field? I realize the focus of this post is on distributions, but to close the gap for a complete setup, would you suggest to set the Transfer in = Form 1040:IRA Contribution self (or spouse)? I think this should trigger the contributions to show up in reports and tax planner. I posted this question last week that went under the radar:

https://community.quicken.com/discussion/7949331/how-to-enter-ira-contributions-question

Jim_Harman

@BK

would you suggest to set the Transfer in = Form 1040:IRA Contribution self (or spouse)?

Yes that is correct. With that setting, IRA contributions from a taxable account are included in the Tax Planner Adjustments to Income section and the Tax Schedule report. Be sure to enter the transfer in the taxable account rather the IRA. Note that the Tax planner does not compute limits to your allowable IRA contributions due to your income or total contributions.

For Roth IRA contributions, the Transfer In box should be left blank because the contributions are not tax deductible.

Also, transfers from one traditional IRA to another are not taxable and correctly are not included in the Tax Planner or Tax reports.

Roth conversions - transfers from a traditional IRA to a Roth IRA - ARE taxable and thus must go through a dummy taxable account in order to be captured.

dexmom

I just did a Roth conversion and used the method of recording in Quicken Premier as recommended by @Jim_Harman . The tax handling is indeed correct, but I lost the original share price, so I cannot track the performance of this fund. For example, let's say you bought 1000 shares at $10 a share in 2021, and are now converting those shares in 2024 at $8 a share (you want to convert when the price is down to save on taxes). The taxable amount is $8 * 1000 = $8000, and that's what goes on your 1040. But in reality, when you do a conversion, you are transferring shares from one account to another, keeping the cost basis the same at $10 a share (that's how your broker tracks it, but they will send you a 1099-R showing the $8 per share conversion). So I used the Shares Transferred Between Accounts transaction in Q, and then manually updated the Tax Planner with $8000 of taxable income (Other Income/Taxable IRA/Pension Dist, select User Entered or Quicken Data with Adjustment). Q transferred each lot from my trad IRA to my Roth.

But if you don't care about tracking the performance of your shares, then Jim's method of tax tracking is probably a bit easier.

Jim_Harman

To track performance when shares are transferred between accounts, you must include both accounts. This will make the Investment performance Report and the Average Annual Return in the Portfolio views correct.