How to show repaid RMD such that net is zero?

Rocket J Squirrel

I repaid my 2020 RMD back into my inherited IRA yesterday. I had previously taken cash from the IRA and transferred it to a taxable brokerage account. Yesterday, I reversed that transaction.

Now I am trying to find a way for it to show up as net zero on all reports and planning tools.

If I set the "Transfers In" tax attribute of the IRA to "1099-R:Total IRA taxable distrib.", i.e., the same TLI as Transfers Out, the amount vanishes from the Tax Planner. That's good.

Unfortunately, the amount of the distribution remains in the Tax Schedule and Tax Summary reports. I hoped the transfer in would balance out the transfer out, but not in these reports.

So I'm looking for a better way to handle this. I could simply delete both transfers and that would make the reports and planners look right, but it loses the true history of what happened.

What would you do?

Chris_QPW

Most likely others will have better ideas than I do on this, but personally I have never been a fan of the "Transfer out/in" setting for tax purposes.  It is a "violation" of accounting practices, just as categorizing a transfer would be in any other situation.

And just like where in Quicken Mac they allowed categorizing transfers, that has come back to haunt them when trying to get reports and budgets to not double count transactions.

And my own experience has been that if I try to use these settings it is "all or nothing".  As in every transfer gets these.  So if for instance I transfer money from one IRA account to another that transfer picks up this setting even if there is in fact no tax ramifications on that transfer, as there might be if the transfer was to a non investment account.

So the bottom line is the way I handle this is outside the IRA account/Tax setting in a split transaction in the non investment account.  Assigning the right categories to each part of that split.  This more work than just setting the tax line on the transfer, but it gives you control of everything on case by case basis.

What's more I think it really more reflects what happens in the real world.

J_Mike

Rocket J Squirrel said:

What would you do?

I think I would try to enter the transactions that occurred - but avoid the use of the Transfer feature and its' associated complications.

Go back to the original distribution transaction and make it a Withdrawal (categorized expense) from the IRA account.
Similarly, record an offsetting Deposit to the regular brokerage account - same category.

Then follow the same procedure to reverse the distribution at a later date.

Appropriate Notes can document what's going on.

Bob_L

I had the same issue.  My original RMDs were entered as transfers as is usually recommended here.  I first set up a new other income sub-category, set to 1099-R taxable distributions.  Then on the date of the indirect rollover I entered a deposit in the account that the indirect rollover cash came from split as a negative amount to the other income sub-category and  a positive amount as a transfer back from that same account.  That worked correctly in my tax reports and in tax planner to reverse the earlier RMD.


I of course also transferred the needed cash to the IRA receiving the indirect rollover from that same checking 

Bob_L

@Chris_QPW  I did a direct rollover last year from a 401k to an IRA, and expected to have the problem you mentioned due to the transfer settings.  It turned out, however, that it worked properly, showing no tax effect from the transfer.

edit:  Could be because it was from a 401, and I think it may have asked me if this was a distribution or words to that effect.  I  haven't tested between two IRAs.

Chris_QPW

@Bob_L If it worked between a 401K and an IRA then I'm sure it will work between two IRAs.

My memory is pretty hazy of what problem I ran into....

Actually what the problem might have been is the Tax in line set, and then make a contribution as a transfer.

Chris_QPW

On second thought maybe it centered around a IRA to Roth IRA conversion.

Anyways it seems to me that back to RJS's question that it is clear that parts of Quicken know about the Tax settings, and others don't which leads to the problem he is having.  And that is caused by the inconsistent account in my opinion.

Or another way of stating this is that as a programmer with it recorded this way I would have to go to every place that might be affected by this setting and make exceptions in the code instead of just using the generic mapping of a category and its tax line.

q_lurker

I concur with J_Mike's approach, though I will phrase it a little differently.

Edit the original "Transfer" in the IRA account to be a "Withdrawal" or MiscExp transaction to a chosen category (I have a Misc category for these things).  You will then need to create a companion transaction in the taxable brokerage account to add the cash value in that account.  Use the same category -- the two will net to $0.

Now for the return, repeat the process as two non-transfer transactions, removing cash from the taxable brokerage account and adding cash (MiscInc) to the IRA account, again using the same Misc category. 

Thinking about it, I'd likely use MiscExp and MiscInc for both transaction just to be as consistent as possible.  

Since no transfers are in place, there should be no impact on tax planning and reports, (as far as I can see).