Improve handling of IRA distributions, QCDs, and Roth conversions

Jim_HarmanJim_Harman SuperUser ✭✭✭✭✭
edited December 2019 in Investments (Windows)
As described in these recent posts
https://community.quicken.com/discussion/7864610/missing-transactions-in-report-tax-summary#latest
and
https://community.quicken.com/discussion/7864607/traditional-to-roth-conversion-and-tax-schedule#latest

and many others, the way Quicken handles taxable transactions in tax deferred accounts is convoluted and confusing, often causing incorrect tax reports and and incorrect data in the Tax Planner. 

The increasingly popular Qualified Charitable Distributions (QCDs) also fall into this category.

Properly designed wizards or Macro transactions to handle these events would be a big help.
-- Jim QWin Premier subscription
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27 votes

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Comments

  • K.O. (Win-Premier)K.O. (Win-Premier) SuperUser ✭✭✭✭✭
    Couldn't agree more and as the population using Quicken ages it will become more important to have the transactions (and tax effects) correct and make it simpler to add transactions.
  • RangerRanger Member ✭✭
    If there were a single macro transaction to make the multiple entries for the annual required distribution, it would be fantastic ! The use of multiple transactions leaves much to be desired and plenty of room for errors.
  • Jim_HarmanJim_Harman SuperUser ✭✭✭✭✭
    Further discussion of the difficulties of entering Roth conversions can be found here
    https://community.quicken.com/discussion/7810546/roth-ira-conversion
    -- Jim QWin Premier subscription
  • MemphisBBQMemphisBBQ Member ✭✭
    I have been using Quicken since DOS3. When I began withdrawing from my IRA account I found it difficult to get the transactions correct so my report from my broker matched Quicken's calculations. The allocation from the broker included both the transfer to my bank and the amount sent to the IRS for my income tax. My Quicken solution was have one transaction match the amount actually deposited into my bank account and a separate transaction entered for the IRS tax payment as if it were transferred to the bank. Then I created a payment to the IRS for the amount that the broker had sent and I had recorded in the separate transfer. I can do a report at any time for all IRS transactions and they will display for me. No split transactions. I have no Roth transfers, but if I remember correctly, I would have a hard time setting them up to get the transfers correct.
  • chitownhockeychitownhockey Member ✭✭✭✭
    The typical transaction for IRA taxable distributions are as follows:

    Set the Account Details of the retirement accounts to > Tax Schedule > Transfers Out:1099-R:Total IRA taxable Distr.

    From the retirement account, sell the number of shares to equal the GROSS amount of your withdrawal.  This will leave a cash balance.

    From the retirement account, use a transaction type of "Cash Transferred Out of Account" for the GROSS amount of your withdrawal, which usually is the cash balance as noted above.

    This will transfer that amount to your checking account and Quicken will automatically tax report the GROSS amount of the IRA distribution.

    From the checking account, locate the transfer transaction.  Split that transfer transaction so that the second line is Taxes: Federal Withholding and use a negative amount for the withholding taxes to the IRS.  You can add subsequent lines for any state or local withholding, as well.

    This results in the NET amount deposited in your checking account.  

    I actually have an Income Reminder setup for the split transaction portion in my checking account which is automatically entered each month.  Then all I have to do is sell the shares in the investment account.

    Easy peasy.  
  • Ted109Ted109 Member ✭✭
    I find that Quicken has given almost no thought to IRA withdrawals. In my case, these are transfers to a brokerage account. QCDs are impossible.

    I a retired software developer and am adept at creating workarounds, most of which don't completely work when it comes to the reports Quicken should be able to do better.
  • Since1996Since1996 Member
    I agree. I did vote up.

    There are more fundamental tax accounting issues with IRA's in Quicken; plus
    there are reporting limitations.

    * Distinguish between regular IRA accounts and ROTH accounts. Add a ROTH IRA account type.

    * ROTH distributions can be non-taxable (or taxable if rules broken).
    * Regular IRA contributions can be deductable or non-deductable.
    * Regular IRA withdrawals are taxable except for non-deductable & QCD distribution rules.
    * But funds can be transferred or rolled over between "same type" "IRA's" with no taxes due.
    * The entire amount of a regular IRA withdrawal can be placed in a ROTH IRA with taxes
    paid from other funds.

    * For outbound IRA transfers, the UI is modified to ask, how much is taxable? For ROTH IRA's the default is zero. For regular IRA's, the default amount is the
    amount transferred.

    * By definition, an amount transferred out to a non-IRA account is a withdrawal, and a checkbox can be clicked to indicate it's an RMD.

    * For inbound regular IRA's, the UI is modified to ask, how much is deductable?
    The default is 0. If an amount is entered, ask for the tax year, if necessary.

    * Currently, tax forms are associated at the overall account level. This is
    incorrect for IRA's. Permit the selection of the tax form within individual IRA
    transactions where funds are transferred between accounts. The default can be blank.

    * Impacted transaction actions that need this follow-up dialog include those that cause funds to enter or exit a retirement account.

    * Whenever asking for the tax year, permit the year to be 0 to signify a
    non-taxable transfer, or add a selection that says "Non-Taxable Transfer".

    Once you do the above at a fundamental level, you can handle the split case with a wizard. Ask how much of the regular IRA withdrawal is being held for taxes by the provider, how much is a QCD, and then transfer the remainder, if any, to the destination account, which could be a ROTH IRA.

    Sometimes a transfer is "in-kind" and sometimes it's swapped for another security and sometimes its liquidated to cash first. Sometimes it's a complete account rollover and sometimes it's specific securities. The wizard could handle whole account swaps such as 401k to IRA.

    Add new investment reports more geared to retirement accounts. While capital
    gains cost basis has no meaning in IRA's, contribution basis and total return does. Market value = Contributions + Return. Distinguish between taxable and non-taxable transfers.

    Note that some non-taxable transfers may still require a tax form to be filed. Also what is important for tax reporting purposes is the market value of the transfer and feed that number to the tax planner as well as the taxable amount. Both values must be reported to the IRS.

    For Quicken Standard Reports, add a Savings section:
    * How much have I saved in tax advantaged investment accounts? By year, show the contribution, total return added, and current market value, followed by a grand total line. Allow a breakdown by retirement account & account type.
    * What account transfers have I made with retirement accounts? How much is taxable? How much taxes were withheld? How much was gifted? How much are RMD's?
    * How have my retirement accounts performed? Capital gains and dividends are irrelevant here. It's the total return that counts. Include that plus amount
    invested (contributions) and current market value by year.

    For long-term product functionality growth, when a retirement account is created or edited, provide entry for the date of birth of the account owner and a checkbox to indicate if the IRA is inherited.
  • DeeLeeDeeLee Member
    now that i am retired and my income is Social Security, Pension, Investment income, and RMDs from IRA accounts, I am very unhappy with Quicken right now: Just moved my accounts to a new WIndows 10 PC and was trying to update things to reflect my retiree income. To find that there is no good way to put in RMD payments and get accurate results is crazy. Please work to bring you program up to date for the may baby boomers that use it!
  • Steve SucherSteve Sucher Member ✭✭
    I agree with comments above that dealing with tax deferred accounts needs to be improved within Quicken.
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