category for IRA distributions?

Jeanne
Jeanne Member ✭✭
edited May 29 in Investing (Windows)
I have IRA distributions transferred to a brokerage account that has a linked checking account. I don't seem to be able to use the "category" Quicken assigns to the deposit (which is just the retirement account name) in any reports.

For my own planning and estimating, I'd like to assign a category "IRA distrib" to the deposit in the checking account. But I get a warning that if I edit the category, the corresponding entry in the retirement account will be deleted.

The only solution I can think of is to put a duplicate deposit in a "petty cash" account (my own little slush fund, if you will) with a useful category to use in my reports. Before I do that, is there some more elegant approach I'm just not seeing?

Thanks very much,
Jeanne

Best Answer

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    You're right: this isn't as easy as it should be. Here's the work around I've used, as recommended by other users...

    You need to do some gymnastics to post a sale in your IRA account, transfer the funds to a non-IRA account, and show that amount as taxable income from a retirement account:

    (a) In the IRA account, create a transaction to record the Sale of the security, creating a cash balance in the account. (You've probably already entered or downloaded this.)

    (b) In the non-retirement checking account, create a transaction to Transfer the cash out of the IRA account into the checking account. If federal and/or state taxes were withheld at the time of the sale, the transaction is a split, with one for the gross amount of the IRA sale and one (or more) lines for the taxes withheld.

    These two steps get both accounts to have the correct dollar amounts: the IRA account is back to a zero cash balance, and the receiving account has the correct cash received. But because Quicken Mac does not include IRA account transactions in the Tax Schedule report, the amount of the distribution -- which is taxable income -- does not show up on the Tax Schedule report. So you need a work-around trick…

    (c) In the same transaction in the checking account, add two more split lines: (1) Use Category "Personal Income:Taxable IRA Withdrawal", which is assigned to the proper 1099-R tax line for the Tax Schedule report, with the amount of the total RMD withdrawal. (2) Use category "Adjustment" for the negative of the same amount, because it's a special category not included in any report.

    (d) The transfer transaction with the splits must originate in the checking or receiving account, not the IRA account; if the split to record the income is in the IRA account, it won't show up in the Tax Schedule report because the Tax Schedule report bypasses IRA accounts. 

    Clearly, step (c) is not intuitive and a hack to make things work. And step (d) is may not be intuitive because generally linked transfers can be entered in either of the accounts involved.

    I should note that there is currently another work-around for (c): make the transfer split also have a category of "Personal Income:Taxable IRA Withdrawal". But I don't recommend that, because we've been told Quicken management is going to remove the ability to have transfers (cash flow transactions) which also have categories (income/expense transactions), since that violates the rules of accounting -- but this loophole currently still remains in Quicken. Since we've been told this loophole will be removed, I recommend doing it as listed above. 

    Quicken Mac Subscription • Quicken user since 1993

Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Accepted Answer
    You're right: this isn't as easy as it should be. Here's the work around I've used, as recommended by other users...

    You need to do some gymnastics to post a sale in your IRA account, transfer the funds to a non-IRA account, and show that amount as taxable income from a retirement account:

    (a) In the IRA account, create a transaction to record the Sale of the security, creating a cash balance in the account. (You've probably already entered or downloaded this.)

    (b) In the non-retirement checking account, create a transaction to Transfer the cash out of the IRA account into the checking account. If federal and/or state taxes were withheld at the time of the sale, the transaction is a split, with one for the gross amount of the IRA sale and one (or more) lines for the taxes withheld.

    These two steps get both accounts to have the correct dollar amounts: the IRA account is back to a zero cash balance, and the receiving account has the correct cash received. But because Quicken Mac does not include IRA account transactions in the Tax Schedule report, the amount of the distribution -- which is taxable income -- does not show up on the Tax Schedule report. So you need a work-around trick…

    (c) In the same transaction in the checking account, add two more split lines: (1) Use Category "Personal Income:Taxable IRA Withdrawal", which is assigned to the proper 1099-R tax line for the Tax Schedule report, with the amount of the total RMD withdrawal. (2) Use category "Adjustment" for the negative of the same amount, because it's a special category not included in any report.

    (d) The transfer transaction with the splits must originate in the checking or receiving account, not the IRA account; if the split to record the income is in the IRA account, it won't show up in the Tax Schedule report because the Tax Schedule report bypasses IRA accounts. 

    Clearly, step (c) is not intuitive and a hack to make things work. And step (d) is may not be intuitive because generally linked transfers can be entered in either of the accounts involved.

    I should note that there is currently another work-around for (c): make the transfer split also have a category of "Personal Income:Taxable IRA Withdrawal". But I don't recommend that, because we've been told Quicken management is going to remove the ability to have transfers (cash flow transactions) which also have categories (income/expense transactions), since that violates the rules of accounting -- but this loophole currently still remains in Quicken. Since we've been told this loophole will be removed, I recommend doing it as listed above. 

    Quicken Mac Subscription • Quicken user since 1993
  • Jeanne
    Jeanne Member ✭✭
    Thanks for this. A complication is that I didn't notice I was posting in the Mac section and I'm a Windows user. But I'm sure you've pointed me in the right direction. I'll have to print it out and I will because, altho I'm not using any tax software, I plan to do so. So I'm grateful that you've expanded my thinking.
  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    Just on a purely "answer only the question asked" it is possible see transfers in a report, but that is exactly what they are you have to look at the transfer section, not the income/expense sections of the report.  And you might have to do filtering not to get other transfers you don't want in the report.

    On the Advanced Tab there are various selections of what kind of transfers to include.
    For instance if you select Exclude Internal and have both of the accounts in the report you will not get the transfer.  But if you deselect one of the accounts in the report, now that it is "unbalanced" the transfer will show up.  For instance:


    Here is what would show up if you select Include all with both accounts selected.


    Oops looking above I see that I actually did it in the wrong direction, but you get the idea.


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  • Jeanne
    Jeanne Member ✭✭
    Chris_QPW, thanks so much for this. I'll have to experiment with it further; it's not 100% clear how it works and it's not as clear a result as I'd hoped for. But I've definitely learned something new, so I do appreciate your post. FYI, an additional wrinkle is that you need to exclude the investment side of the receiving brokerage account and only include the receiving linked checking account + the sending retirement account. I've no reason to have both halves of the brokerage account in the report at this point; I just checked it automatically I guess. Getting rid of it helps streamline the results a bit.
  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    BTW on I do think that the way @jacobs suggested it the best way to go.
    But I also want to mention that Quicken Inc has another "tool" that I don't think Quicken Mac has.
    You can set the tax schedule line for transfer out in the IRA account, and that should get the transfer to show up in the Tax reports.  You find that in the Account Details -> Tax Schedule

    There is more discussion on that in this thread (and there are several other threads that this kind of thing is talked about).
    https://community.quicken.com/discussion/7893753/ira-distribution
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  • Stephen Hansen
    Stephen Hansen Member
    I have a slightly different (but closely related) problem, and (I think) a good solution.
    I hope this can be helpful to someone....

    My problem is that the IRA Distribution goes into a Brokerage account, and has income tax withholding. So there needs to be a tax/net split, at some point in the process.
    The transfer from the IRA account cannot record the deduction for Tax withholding, and
    the transfer into the Brokerage account also cannot record the deduction for Tax withholding.

    So I run the transaction through a separate "Cash" account. "Cash" is set up like a checking account. (I used to keep track of petty cash in my wallet, but gave up on that silliness years ago. Too much accounting. These days, "Cash" always has a zero balance. It is not an actual checking account. )

    The transaction in the Cash account has a zero (0.00) net value. It consists of three splits:
    1. A transfer from the IRA account, with category "IRA Distribution".
    2. A split with category "IRA Distribution Tax Withholding", and a negative amount.
    3. A split for the transfer to the Brokerage account, also with a negative amount.

    The category "IRA Distribution" is an "income", with tax-related, form 1099-R, and "Total IRA taxable distrib.". It lands on the 1099-R as the gross amount.
    The category "IRA Distribution Tax Withholding", is an "expense", with tax-related, form 1099-R, and tax-line "IRA federal tax withheld". It lands on the 1099-R as the withholding amount.

    My only remaining difficulty is that the IRA account brokerage statement has two transactions (one for the net amount, and one for the withholding), while my quicken shows one transaction (for the gross amount). That is only a difficulty when I reconcile the particular statement, once a year.

    I do agree, it would be helpful if quicken could do this transaction auto-magically.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    The Idea post requesting improvements in this area is here
    https://community.quicken.com/discussion/comment/20073119

    Please comment and vote by clicking on the small up arrow under the vote count.
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