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Help with RMD adjustment

Tony Dalia

I have a small but complex transaction that I need to reconcile. I deposited the check but it currently shows uncategorized. There are 15 transactions in IRA, all showing "sell" Five transactions total the check deposit, and the other 10 are split between state and federal tax. I tried creating a split from the checking account, but it didn't relieve the IRA accounts. What is the best practice for making the transaction match? Thank you.

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garysmith87

Hi Tony.

With Quicken Mac, the best way to handle the state and federal tax withholdings are from your checking account.

Deposit the check amount in your checking account (which you've done).

Split that check as follows:

Gross amount withdrawn from your RMD, categorized as a transfer from the investment account. Minus the amount of federal withholding tax. Minus the amount of state withholding tax.

This will result in the NET amount in your checking account.

In the investment account...you should now see the GROSS amount withdrawn from your IRA. Delete ALL the downloaded transactions, but leave the one transfer. Then create a SELL (or multiple SELL) transactions for the sale of your investments to create the gross amount.

There is basically NO way to account for the taxes in your investment IRA account, unfortunately.

Additionally, in order to account for the taxable withdrawal from your IRA, most of us will add two lines in the checking account split:

"IRA Taxable Withdrawal" (category) equal to the amount of the GROSS distribution.
Minus "Adjustment" (category) equal to the amount of the GROSS distribution.

These two split lines will cancel each other out for a net zero.

Why do we need to do this? Because Quicken Mac has no way to account for the taxable withdrawal from retirement accounts in the Tax Schedule Report. And it's really not recommended to use a category that's different from the Transfer account since Quicken Mac reportedly will be phasing this out in the future.

Quicken Windows allows for the proper tax handling of amounts withdrawn from retirement accounts. As of this time, Quicken Mac does not.

And finally, I have a Scheduled Income transaction set up, with all the splits necessary for the checking account. Then all I have to so is go to the IRA account and do the SELL transaction(s) of the securities.

Once again, in your case, just make sure you delete the downloaded withdrawal transactions from the IRA too.

Tony Dalia

I am trying to follow you, however these particular IRAs are American Funds. The amount deposited into the checking account was the NET amount of $138.33. Each of the 5 funds show the gross amount of each distribution instead of zero which it normally shows after any and all downloads. I have attached a copy of how the amounts shake out. Even though if I screw it up, I can go to a backup, I don't really want to take that chance. I appreciate any further guidance and thank you for the help so far.

RMD.pdf

Jon

I have to deal with something similar when I make my yearly IRA withdrawal. First I have a SELL transaction for whatever fund I'm selling to generate the cash I'm withdrawing. Then I have two PAYMENT/DEPOSIT transactions with negative amounts - one for the Federal tax withheld, one for the State tax. Finally I have a PAYMENT/DEPOSIT transaction for the net amount being transferred to my bank account.

In this case, since there are 5 funds involved I would have 5 SELLs, 5 PAYMENT/DEPOSITs for the federal tax amounts, 5 PAYMENT/DEPOSITs for the state tax amounts, and one PAYMENT/DEPOSIT for the $138.33 transfer to banking.

Jon

I forgot to say, all these transactions would be entered into the register for the IRA account. The only thing that would show up in the bank account register would be the transfer.

Also, I keep the federal tax, state tax, and transfer to savings as separate transactions because that's how they get downloaded from Fidelity. If your investment firm reports things differently I would try to match it, but I would expect any split transactions to go in the IRA register not the bank account register.

garysmith87

Tony Dalia said:

I am trying to follow you, however these particular IRAs are American Funds. The amount deposited into the checking account was the NET amount of $138.33. Each of the 5 funds show the gross amount of each distribution instead of zero which it normally shows after any and all downloads. I have attached a copy of how the amounts shake out. Even though if I screw it up, I can go to a backup, I don't really want to take that chance. I appreciate any further guidance and thank you for the help so far.

I understand your explanation...but you'll have to work "backwards" on this.

There is no way to do what you're trying to do in an investment/retirement account and have things categorized correctly.

You HAVE to work from within the checking account...so you'll need the GROSS amount of the distribution and then subtract off the taxes to get you the net that you have in the IRA account.

The gross amount is a transfer, and the taxes are subtracted and categorized accordingly from there.

The transfer then will show in the IRA account...and to get the cash balance you'll need to SELL whatever securities you hold in that account to get you to a zero cash balance. As I said, I'd just delete the withdrawal and tax transactions that downloaded into the IRA account from your brokerage.

Here's my IRA transaction in my checking account. Note...I have this set up as a Scheduled Income transaction so it appears every month with no intervention on my part, but that is optional. Additionally, as I mentioned in my first post, I have added TWO split lines at the bottom to account for the categorization of the withdrawal as a taxable IRA withdrawal, which then flows to the Tax Report...and the accompanying adjustment to "zero" out the extra split line. Not elegant, but for now that's how Quicken Mac works.

Image: https://us.v-cdn.net/6031128/uploads/editor/7p/osxfe1k27gaa.jpg

Now, here's the IRA register, showing the SELL transactions of the actual securities I hold in the IRA. The transfer flows from my checking account. Note that the cash balance in the account after the transfer and the SELL transactions is again zero.

Image: https://us.v-cdn.net/6031128/uploads/editor/7y/xg9bx92ihari.jpg

Hope this clarifies things. Post back if you have more questions.

Once again, don't start with the investment account. Do the tax splits in the checking account.

Tony Dalia

I see what you are saying, and that would work well for me IF my "IRA" was one register like your annuity. But my American Funds IRAs (in this transaction) is 5 different registers. And this is a one-off transaction to get the annual minimum in line, because the lion's share of RMD comes from an annuity.

Jon

Sorry, didn't realize these were in separate accounts. That complicates things.

So if I understand correctly, you want to have one transaction in each of the 5 funds showing the gross amount of the withdrawal, split into taxes & a transfer to your bank account, like so:

And in the bank account have a single deposit showing the net incoming transfer from all 5 funds, like so:

Image: https://us.v-cdn.net/6031128/uploads/editor/fj/4htpa1t6jkrz.png

I don't think there's any way to do that. You can have a split transaction on one end of a transfer or the other, but not both. If you want a single deposit into your checking account like image #2 above, you'll have to have multiple transactions in the IRA register, like so:

Image: https://us.v-cdn.net/6031128/uploads/editor/2n/yxoklue02kcz.png

Or you can have a single transaction on the fund side like image #1 but then you'll have 5 separate deposits in the checking account. You'll have to decide which one you can live with.

garysmith87

Tony Dalia said:

I see what you are saying, and that would work well for me IF my "IRA" was one register like your annuity. But my American Funds IRAs (in this transaction) is 5 different registers. And this is a one-off transaction to get the annual minimum in line, because the lion's share of RMD comes from an annuity.

Hi Tony.

It really doesn't matter how many accounts the RMD comes from... one account, five accounts, ten accounts. If it's one deposit into your checking account, just split the GROSS amount among five transfers...subtract out the federal and state withholding amounts and (optionally) create the additional split lines for the Taxable IRA Withdrawal category and Adjustment category. If it's five separate deposits, then create five transactions in the checking account.

Then, in EACH IRA account, do the SELL transactions for the shares...and delete the previously downloaded transactions, as they won't match up.

As I said, you HAVE to do the withholding deductions in the checking account where the net amount was deposited. There is no way to account for the withholdings in an investment/retirement account.

Post back if you get this working or not. Hopefully, my explanation is clear enough...but if not, ask away.

Jon

garysmith87 said:

There is no way to account for the withholdings in an investment/retirement account.

I just showed how to do it. I've been doing it that way for 5 years now. What problem am I not seeing?

garysmith87

Jon said:

garysmith87 said:

There is no way to account for the withholdings in an investment/retirement account.

I just showed how to do it. I've been doing it that way for 5 years now. What problem am I not seeing?

Your way works...to an extent.

Go ahead and do it your way...and now go to your Tax Schedule report.

Where's the Taxable IRA Withdrawal listed in that report?

There is none.

That withdrawal you just made ($27.67 in your example) doesn't show up in the Tax Schedule report because the Tax Schedule report doesn't have any mechanism to include or exclude transfers. So, if you actually need to see your REAL taxable income, you're not going to see that in the Tax Schedule report. I use that Tax Schedule report at the end of the year...because it has all my taxable income and tax deductible expenses all reported in one convenient place.

That's why you need TWO extra offsetting split lines in your checking account split. One is an "extra" gross income amount, but categorized to Taxable IRA Withdrawal (with the proper tax line setup) PLUS the offsetting Adjustment category which negates the previous entry.

You can NOT do that type of split with those two types of entries in an investment account register. The Tax Schedule report > All Accounts selected specifically states that it "omits Seperate and retirement accounts". So, even though you can make those entries in your retirement account, they will be omitted from the Tax Schedule report.

As I said, your method DOES work...but it won't get you the complete results most of us are looking for.

I've actually tried it your way...and there is NO way to get those withdrawal transactions to show up in the Tax Schedule report.

Please...go to your Tax Schedule report and let me know if you actually see where those taxable distributions actually appear in that report. I'm close to 100% sure you won't see them.

Now, if you don't ever use that report...

garysmith87

@Jon

Further, I just checked...even the tax withholding amounts you showed in the investment account (federal one line and state another line) do NOT show up in the Tax Schedule report.

Once again, even though those are not transfers, because the transactions are in retirement accounts those transactions are automatically excluded from the Tax Schedule report.

Sorry...but your method won't work properly.

garysmith87

The Tax Schedule report is one of Quicken Mac's "legacy" reports and thus does not have the customization as other reports may have...yet.

I guess you could do an income/expense report that includes those transfers and includes those withholding categories...among other taxable income categories and tax deductible expenses...and just rename the report to Tax Report.

In that case, you could get your method to maybe work (although I didn't test it out).

When I have some time later or this weekend, I'll play around with the Income/Expense report engine and see what I can come up with.

It would be great to be able to eliminate the (in my view) extra two lines in the split.

Jon

You're right, by default the Tax Schedule report excludes retirement accounts, but if you edit the Tax Schedule report and select "Selected Accounts" instead, you can select *all* your accounts including retirement accounts, and then those transactions show up. The downside to that is you get other IRA transactions pulled into the report which aren't taxable - things like reinvested dividends & capital gains. There doesn't appear to be a way to control how those are categorized - if there were you could assign them different categories which were not flagged as tax related. So it's a mixed bag.

You can create a custom report which includes only tax-related categories but it would suffer from the same problem.

I guess I never noticed this before because I only use the Tax Schedule to find deductible expenses - I get witholdings off the 1099-R - so the default settings work for me. But if you're relying on the Tax Schedule to report those witholdings, it's a problem.

jacobs

@Jon I never thought to try to add the IRA accounts in the Tax Schedule report. I haven't tried it, but once you do that, won't dividend income and capital gains in the IRA accounts show up in the Tax Schedule report? That wouldn't make this viable for me or most users.

Jon

@jacobs You're right, it does; I didn't notice that until after I had written my initial reply. I think I posted my edit while you were composing your post.

Jon

I thought maybe I could work around this by saving two customized tax schedule reports: one for tax witholdings which includes the retirement accounts, and one for all other tax-related categories which excludes the retirement accounts. That kind of works but the tax witholding report is still pulling in some capital gains transactions for reasons that aren't clear to me. So that doesn't entirely work.

garysmith87

@jacobs beat me to the punch. Including the retirement account WILL include all reinvested dividends and capital gains in the report too.

I also found another problem with your method.

I use the Banking grouping. There are three headings...transactions, expenses and income.

The Expenses and Income headings give you a pie chart of the appropriate categories.

If you do it your way, the income (which you have as a transfer) is not included in the pie chart...because "transfers in" do not get included. And your tax withholdings aren't included in the expenses pie chart because you accounted for them in the retirement account...not in a banking (checking) account.

If you do it my way with the transfer categorized "twice", once again with Taxable IRA Withdrawal category, that amount DOES get included in the Income pie chart because its an actual category and not a transfer. And the tax withholdings show up in the Expenses pie chart because they are accounted for in the banking (checking) account.

The problem we've both uncovered is that Quicken Mac still has some glaring errors with how it handles taxable transfers from tax deferred accounts... and it's really messy, not to mention confusing. Somewhere down the road the Quicken programmers need to fix these problems so the workarounds suggested (double entries that cancel each other out) don't have to be used. And those fixes have to include a new customizable Tax Category report, an entire revamp of the income and expenses grouping pie charts...and customization of the inaccurate Home tab (which I never use).

Appreciate your perspective and examples, however. Thanks.

Tony Dalia

After some trial and error, I ended up going into the checking account and creating a split from the five IRA accounts and that seemed to balance it. I am leaving the tax alone and will make sure the year end statement matches Quicken. As you have said before it worked fine in Windows, but after I got the iMac the RMD switched to the annuity and I didn't have the "same" dilemma, although the annuity does not download, Thank you to all for all input as I think I understand enough to be dangerous, even though a few pennies difference often drives me a little crazy.