RMD Distribution

Barbara O'Keeffe

When I pull up the Tax Report for this year, it lists the RMD from our IRAs as a Capitol Gains instead of part of our ordinary income. I can't find anyway to get it into the proper place. I also don't see why every monthly disbursement has to be listed and I have to go through clicking so that all I see are the totals. I use this for planning purposes. Do I have to do my own report because someone doesn't know that Traditional IRAs are taxed as income, not Capitol Gains? I am getting tired of not being able to edit the report template, but have to start from scratch on everything. Might as well go back to just using a spreadsheet

NotACPA

I hadn't noticed that this is a QMac question ... but there's also a way in QMac to see if the account is tax-deferred or not, I just don't know it.

NotACPA

How did you record the distribution from  your IRA to your taxable account?  What action, in the IRA account, did you use?

And, when you do TOOLS, Account List and click EDIT adjacent to the IRA account ... is the "Tax Deferred" option set to YES?

NotACPA

I hadn't noticed that this is a QMac question ... but there's also a way in QMac to see if the account is tax-deferred or not, I just don't know it.

jacobs

@Barbara O'Keeffe. I'm not sure I understand all the issues you're raising about reports. What do you mean you "can't edit the report template and have to start from scratch for everything"? Reports can be edited, and the edited reports can be saved as custom reports. We can explore that further if you explain more about what you;'re trying to do and having trouble with regarding reports.

But I'll start with the original question about RMDs, and echo what NotACPA asked above: how did you record these transactions in Quicken?

Quicken Mac doesn't currently have a single-step way to do this, so it takes a little finesse to get things to work the way you'd want. Here's the way I approach this...

(1) In the IRA account, create a transaction to record the Sale of the security(ies), which creates a cash balance in the account.

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

These two steps get both the IRA account and the receiving account 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 -- correctly -- include IRA account transactions in the Tax Schedule report, the amount of the RMD (which is taxable income) does not show up on the Tax Schedule report. So you need to perform a little trick to get Quicken to count this as income.

(3) In the same transaction in the receiving account which does the transfer, add two more split lines:

(a) Use Quicken's 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.

(b) Use category "Adjustment" for the negative of the same amount, because it's a category not included in any report.

Now, the amount of the RMD withdrawal will show up in the Tax Schedule report (and any other category-based reports) as income, as expected.

EDITING TO ADD: There is an Idea post requesting Quicken Mac to have a simple, single step way of handling RMDs. Please take a few seconds to visit this post and add your vote in favor of it. 

Barbara O'Keeffe

So I was already doing everything Jacobs had suggested except for the adjustment line. I tried that and now it appears in two places, both the 1099-R listing and the Schedule D Capitol Gains area. So I went back and checked and sure enough I had included the Retirement IRAs as part of the accounts for the Tax Schedule report. I wasn't entirely sure why the 'adjustment' line was needed, still not sure, but I took it out and the report stayed the same. I suppose this is because the account that I set up goes to zero after each monthly payout because I then reinvest the funds in taxable accounts, different each month, so the account is always zero. Did add my vote to your Idea Post. I guess maybe Quicken doesn't realize that we don't all become incompetent once we pass 70 and still do our own taxes? What I did find gratifying (and embarrassing) is that I was on the right path, just hadn't check to make sure the correct boxes were checked when running the report.

Now if I could only figure out how to show just the totals in each area rather than each monthly items without physically klicking on the grey arrows, I would be happy.

jacobs

You should not be seeing anything from your RMD reported as a capital gain. If you are, something is recored incorrectly.

The only transaction in your IRA should be the sale of securities, and the transfer to a non-IRA account. The sale of securities will not generate capital gains in the Tax Schedule report, because the Tax report ignores activity in IRA accounts.

The transaction to categorize the income to "Personal Income:Taxable IRA Withdrawal", offset by the opposite split to Adjustment, needs to be in the non-IRA account. If you do that, there won't be any capital gains.

The reason for the adjustment line is because we're trying to 'cheat' on Quicken by making a transfer also have a category. The transfer doesn't have a category. So we need to create a split line to generate income. How can you create income without also increasing your account balance? By making an opposite split to the special Adjustment category, which doesn't show up in any report. 

Barbara O'Keeffe said:

Now if I could only figure out how to show just the totals in each area rather than each monthly items without physically clicking on the grey arrows, I would be happy.

Are you referring to the Tax Schedule report showing every transaction? You can change it to just show a summary by using the drop-down on the right side of that report, where is says "Update View To Show Me". Select "A summary of all categories" or "Top-level categories only". Those will eliminate the individual transactions.

Barbara O'Keeffe

Jacob, as I said when I had first set things up the all Investments were included in the area, which meant the IRAs were treated as investments, not tax deferred accounts. These accounts have be transferred from version to version, one from 1998 when I first started using Quicken. Took care of that and all is good. I don't need to use the adjustment line because I do a transaction sending the proceeds into the brokerage account where the net proceeds (after tax deduction) are reinvested into other taxable funds.

Yes, the Update View works! Small type over on the side not as an Edit option. Totally missed seeing it - I'll blame the progressive bifocals for that! Thank you.

jacobs

@Barbara O'Keeffe If you've got everything worked out to your satisfaction, great. I just wanted to follow up on two things you mentioned.

You had complained in your first post above about seeing Capital Gains from your IRA account in the Tax Schedule report. If you have the account set to Type=Brokerage instead of Type=Traditional IRA, as I believe you're saying most recently, that would explain why you saw the capital gains on your IRA withdrawal. You said: "Do I have to do my own report because someone doesn't know that Traditional IRAs are taxed as income, not Capitol Gains?" the answer is that Quicken knows not to show capital gains for retirement-type accounts on the Tax Schedule report -- but if you don't have the account is set to an IRA type, then it shows the capital gains because you have is as a regular brokerage account. It's quite easy to change the account type by going to the Settings screen for the account and selecting Traditional IRA for the Type.

If you do set the IRA account too Type=IRA, that creates the second issue of making the IRA withdrawal into taxable income. The way I suggested doing the transfer from the IRA account to the non-IRA brokerage account deals with (a) moving the money to the right place and (b) categorizing the money as taxable IRA income. This transfer transaction must be in the non-IRA account which receives the funds from the IRA. (It will not work if you do the opposite, making the transfer from the IRA account, because any income in an IRA account is intentionally and correctly ignored in the tax report.)

Here's a sample of what such a transaction -- in the receiving brokerage account -- would look like:



The first split line transfers the money from the IRA account into this account, which is a non-IRA brokerage account. The second split line categorizes the money as taxable IRA withdrawal income. But because this doubles the amount of the transaction, the third split is needed to make an adjustment to reduce the amount of the transaction back to the original amount of the funds transferred. 

Barbara O'Keeffe

No, the specific IRA accounts were listed as Traditional IRAs. BUT, I had inadvertently left the whole "Investment Section" as checked for the Tax Report. When I removed the IRAs group, the problem went away. So apparently the report form overrides the individual designation on each account.

After putting the RMD into the separate RMD Account (cash account), I have two listings for our RMDs. Then I do another Transfer into my Brokerage Account and in that transfer I also make the Federal Tax Payment. So the account is left at zero at the end of the month. This is the first year I decided to do that, I usually just wait for the end of the year notices at tax time to group it all together to enter into TurboTax.

Yes, I know that I could link my investment accounts to do downloads, but I don't feel confident in going through Quicken for this linkage. Just one more place where things could be hacked. And I'm not disparaging Quicken, but I just feel better manually entering information as I need to do it. Some with reconciling, etc., I download the statement from the bank/investment firm and do it manually.

jacobs

Nothing wrong with entering your investment transactions manually! And I say that because I enter my investments manually, too.  It's just the way I've always done it -- since before downloading was possible -- and I find entering my transactions quarterly is a good interval (not too frequent or infrequent) to look at my various accounts, see how they're performing, and think about whether any changes might be in order. 

Glad you got everything squared away. Best wishes.

garysmith87

To @jacobs:

I've added the two extra lines in my RMD transactions from my checking account. That seems to work for the Tax Schedule report as the two extra lines ARE needed to report the IRA income distribution.

And Quicken Mac now allows you to include transfers or exclude transfers in reports and budgets...so the extra lines AREN'T really needed there. I can just include the transfer in. My monthly/yearly reports include the transfer, but don't include the IRA income distribution or the adjustment categories.

Unfortunately, however, those extra lines mess up the HOME screen numbers as the income is counted twice in the "Net Income" home screen portion.

And the Quicken Mac iPhone app is completely messed up in the monthly Summary section because the Adjustment amounts are added in.

There's no consistency between any of this.

jacobs

Ah, sorry... I don't use the Home screen at all, nor do I use the mobile app.

sfb71

In Quicken for Mac Deluxe 6.4.4 there is no category "Personal Income:Taxable IRA Withdrawal" - what is the work around?

Jon

You can add your own categories, so go ahead & make one. Flag it as tax related & you can specify which form & line it's associated with (1099-R Total IRA gross distribution would be my guess).

sfb71

Thanks

jacobs

@sfb71 That's odd; there is a default category in Quicken Mac, under the main category of Personal Income, for Taxable IRA Withdrawal. (I just verified this by creating a blank, new file.) And it's a "required" category, which means you shouldn't have been able to delete it. If you don't see it, make sure the little triangle to the left of Personal Income is pointing down, revealing all its sub-categories.

But if it's truly missing, although I don't understand how, you can create your own as Jon said above and assign the appropriate tax line to it, as shown here:

sfb71

I do not have a required category for Personal Income: Taxable IRA Withdrawal, so I added one as recommended and added the splits to the receiving account. It worked as it should. Thanks again. Strange that I do not have the required category. I have Quicken for Mac 6.4.4, and there are no updates.

garysmith87

I can also verify that I do NOT have a Personal Income:Taxable IRA Withdrawal category.

As a matter of fact, I don't even have a Personal Income category at all.  

Jon

I don't have that category either. But it turns out that category can be deleted even though it's flagged as Required.

Barbara O'Keeffe

Jacobs, seems you have a different version than the rest of us, because I can't find the category Personal Income either. My version is Version 6.4.4 (Build 604.41834.100) and when I checked it says I'm up-to-date.

lhossus

My production Quicken data file does not have Taxable IRA Withdrawal as a category. 

However, similar to Jacobs finding, a test data file I set up in August does have Taxable IRA Withdrawal as a Required category, and this category is a sub-category of Personal Income.

I invite anyone that is curious, and does not find this category present in the categories list, to try setting up a test Quicken data file. Does it include this category?

Perhaps the default category list included with newer Quicken releases has been modified. The fact that this is a Required category has me wondering if there is a new Quicken feature coming that would require this category.

jacobs

After doing more digging, I agree with @lhossus that some of my older test files do not have this category, but a new blank data file I just created, as well as my live data file, does. It's not the version of software, but eh age of the data file that seems to matter. I'm not sure what the wizards on the Quicken Mac team are up to!  (I hope they're creating a process to handle RMDs from IRA accounts, which now requires some trickery to both transfer the funds and make it count as taxable income.)

In any case, to the original questions about this, you can easily create your own category, or sub-category of whatever category you use for your salary or other income. 

garysmith87

The addition of "adjustment" split lines to account for the actual taxable transaction irks me no end.  

It's also the only way to get the "pie chart" to show the amount as income in the account or sub group or group.  

Seems like the handling of transfers, with the addition of including or excluding transfers in reports and budgets, is only 2/3 of the way completed.  They totally forgot about the pie charts, the HOME screen and the mobile app.  

Why can't we get that same feature in the register pie chart displays, the HOME screen display and the mobile app too?  

Or better yet, just a way for distributions from retirement accounts to be counted as taxable income and show as income?  

Sometimes I just scratch my head and wonder.