How to record Miscellaneous Income in an IRA account?

roblester999

Every so often I receive a small check that results from class action securities litigation. These payments are not taxable income, so it is not appropriate to show them as Interest or Dividend income.

In a Brokerage account type there is an Action category MiscInc I use to record these payments. Doing it this way doesn't cause these deposits to flow through to tax reporting.

But in Traditional IRA or Roth IRA account types there is no MiscInc Action category, so I wind up recording them as Interest. This isn't taxable income, but in the special case of an IRA recording these payments as Interest doesn't mess up tax reporting since income in these account types isn't taxable.

I'm using Quicken R30.14. Looking back a few years in my transaction register, Quicken used to support MiscInc for IRA account types, so somewhere along the way this capability was removed.

Any ideas?

Tom Young

There's still the ability to record miscellaneous income in an IRA.  Select "Inc - Income (Div, Int, etc.)"; Miscellaneous is at the bottom of the column.

Inside an IRA and from a statutory accounting perspective (i.e., taxes) this isn't a form of income it's a special transaction called a "restorative payment", but you're right that as long as the "fresh money" isn't counted as a contribution, posting as a form of income is fine.

Tom Young

There's still the ability to record miscellaneous income in an IRA.  Select "Inc - Income (Div, Int, etc.)"; Miscellaneous is at the bottom of the column.

Inside an IRA and from a statutory accounting perspective (i.e., taxes) this isn't a form of income it's a special transaction called a "restorative payment", but you're right that as long as the "fresh money" isn't counted as a contribution, posting as a form of income is fine.

roblester999

Ok, thanks - your solution fixes my issue.

What's different is that in Brokerage account types you can just right click on the 'Action' area and MiscInc is a choice.

UKR

Where did you deposit that check you received? Into your personal checking account or did you send it to the brokerage for deposit to the IRA account?

Not knowing any better about tax consequences, I have always deposited these checks into my checking account, categorized as Misc. Income, not taxable.

roblester999

In cases where the security was held in an IRA, the check I receive is payable to my name c/o my IRA. I think that if I cashed it or deposited it into a non-IRA account, that would create a taxable event

Tom Young

"Not knowing any better about tax consequences, I have always deposited these checks into my checking account, categorized as Misc. Income, not taxable."

In a non-retirement account these class action monies frequently are taxable, depending on the situation.  In an IRA where money is received because of malfeasance on the part of a custodian or company (investment), putting the money into a non-retirement account posses a problem if you then try to deposit the money into an IRA as Quicken sees it as a "contribution", which it isn't.

Frankx

Hi @roblester999,

You raise an interesting question. 

In IRA accounts with a brokerage firm you should be able to record these as "Cash Transactions" > Other Cash Transaction" (at the very bottom of the drop-down list) > and then chose the Category from the full list - I'd suggest you use: "Personal Income" > "Other Income" > "Miscl." or something similar.

Also wanted to note that, while this income would (likely) generally not be taxable, it will actually be taxed in the case of the traditional IRA, since all distributions therefrom ate deemed taxable income.

Frankx