Accounting for IRA Distributions -- still not working

pauljasmine

I'm adding this question to a previous thread that was closed. I can see how you did the split transaction in the destination bank account to subtract taxes. I think what you're saying is you have to record as a deposit, with no direct transfer linking between the IRA account and the bank account. If I record the gross distribution as a transfer from account to account, then I'm left with a remaining uncatagorized amount equal to the gross distribution, which is not messes everything up. So I think you're saying I have to record the transfer as disconnected account withdrawal and deposit, not a transfer?

Rocket J Squirrel

I'm not quite following why you wouldn't use a transfer. A deposit into the receiving account is how I would do it, with the first line of the split being the transfer and the following lines being the taxes withheld.

J_Mike

Having dissiculty following your line of thought - but here is an example of how to record an IRA distribution that is deposited to your checking account.

Example; Gross distribution of $1,000 with $200 Fed w/h and $50 State w/h.
The net deposit to checking is $750.

In the checking account register, open a split transaction.
Split #1 - The gross amount of $1,000 recorded as a Transfer from the IRA account.
Split #2 - The Fed w/h of -$200 - a negative number.
Split #3 - The State w/h of -$50 - a negative number.
The net of this transaction is $1,000 - $200 - -$50 = $750.
This should match what your bank reports as a deposit to checking.

The IRA account will then show a transaction of $1,000 being transferred to checking - the gross distribution.

If you download to the IRA account, you will likely get three transactions from the FI - the net amount of $750 plus the transactions for the Fed and State w/h. Delete these three downloaded transactions from the register as they are redundant.
Leave only the gross distribution transfer to checking ($1,000).

Post back if you have further questions.

Tom Young

"But if the gross distribution is recorded as a transfer, it cannot be categorized as income so that I can include it as income on a report."

That's not correct.  You can show the transfer as a form of "income" on reports, like a Spending report.  Simply add the IRA as a "Category" using the reports customization feature.  The dollars out of the IRA will show up in the Income section of the report.

Rocket J Squirrel

I'm not quite following why you wouldn't use a transfer. A deposit into the receiving account is how I would do it, with the first line of the split being the transfer and the following lines being the taxes withheld.

J_Mike

Having dissiculty following your line of thought - but here is an example of how to record an IRA distribution that is deposited to your checking account.

Example; Gross distribution of $1,000 with $200 Fed w/h and $50 State w/h.
The net deposit to checking is $750.

In the checking account register, open a split transaction.
Split #1 - The gross amount of $1,000 recorded as a Transfer from the IRA account.
Split #2 - The Fed w/h of -$200 - a negative number.
Split #3 - The State w/h of -$50 - a negative number.
The net of this transaction is $1,000 - $200 - -$50 = $750.
This should match what your bank reports as a deposit to checking.

The IRA account will then show a transaction of $1,000 being transferred to checking - the gross distribution.

If you download to the IRA account, you will likely get three transactions from the FI - the net amount of $750 plus the transactions for the Fed and State w/h. Delete these three downloaded transactions from the register as they are redundant.
Leave only the gross distribution transfer to checking ($1,000).

Post back if you have further questions.

pauljasmine

I understand your example. But if the gross distribution is recorded as a transfer, it cannot be categorized as income so that I can include it as income on a report. I’d just have to run one of the reports that shows transfers.

Rocket J Squirrel

The Tax Summary Report will show this as a transfer, but it is included in your overall income at the bottom of the report. The Tax Schedule Report will show this correctly as 1099-R data.

Make sure you have your IRA tax schedule transfers out set to "1099-R:Total IRA taxable distrib." and this will work.

Rocket J Squirrel

I just noticed there are actual tax line items for taxes withheld from IRA distributions.

I hadn't noticed these because I take the easy way out and have no taxes withheld from my distributions. Instead, I file quarterly estimated taxes. Much easier for me. Withholding is optional, not required.

Tom Young

"But if the gross distribution is recorded as a transfer, it cannot be categorized as income so that I can include it as income on a report."

That's not correct.  You can show the transfer as a form of "income" on reports, like a Spending report.  Simply add the IRA as a "Category" using the reports customization feature.  The dollars out of the IRA will show up in the Income section of the report.

pauljasmine

Great, thanks for the response!