traditional IRA tax settings information

SomebodyInGNV

I have a Fidelity traditional IRA with transfers out set up in Quicken as 1099-R:Total IRA taxable distribution. I have automated withdrawals set up with 10% withheld by Fidelity for FIT. In Quicken, I created a paycheck for the withdrawal with the tax being a deduction category linked to 1099-R:IRA federal tax withheld. All of this works as desired in the tax planner.

I intended to cancel the automatic withdrawal but forgot. With Fidelity's assistance I transferred the total amount from my checking account back into the same tIRA, characterized as a 60-day rollover. (It rolled over back into itself.) That cancels the withdrawal.

As stated above, transfers out are linked to 1099-R:Total IRA taxable distributions. There currently is no tax line linked to transfers in. What tax category should I assign so the rollover is characterized properly?

If relevant, this setting will matter only for this single transaction. There will not be any future contributions or rollovers because I'm retired and don't have any other retirement accounts. Everything else will be transfers out.

Thanks for your time.

Jim_Harman

One way you might handle this would be to pretend in Quicken that the mistaken distribution and the rollover reversing it never occurred, by deleting both transactions.

Was the rollover for the gross amount of the distribution or the net amount? You will want to make sure that the withholding is handled correctly in Quicken and reported correctly by Fido.

Back up your  data file first, in case the result is not what you wanted.

SomebodyInGNV

The rollover deposit is for the gross amount. Taxes were withheld from the withdrawal so the net amount was deposited into my checking account, but the withheld amount can't be reversed. It will be applied to my tax bill.

Independent of this situation, how will Fido report the rollover deposit? On a 1099-R? If so, what line? It seems to me that should be the one to use.

Jim_Harman

OK, so deleting both transactions won't work if you want the withholding recorded in Quicken.

You want to reverse out the income, so you could try a transfer from the checking account to the IRA, with Transfers in set to the same income category you used for the distribution.

volvogirl

FYI- When you put it back into the IRA you could have added the withholding back in from your own money.  So you would have gotten the withholding back on your tax return.  Now the withholding counts as a distribution and is taxable.  But don't you need to take distributions for the RMD?   Or do you have other distributions to cover that?   

SomebodyInGNV

I'm not old enough that I need to take RMDs.

I just set Transfer In to "Form 1040:IRA contribution, self". That records it on the Adjustments tab of the Tax Planner as Allowable IRA Deduction. The effect is to neutralize the gross withdrawal, which was my goal.

Fidelity doesn't have a mechanism to reverse the FIT withheld. I got only the net amount deposited to my checking account. For the "rollover" to be a tax-free transaction, I have to deposit the gross amount in the IRA. That means I have to include the withheld amount out of pocket, but I have it on hand, so that's not a problem.

The withheld tax will be reported to the IRS and taken into account in my final tax bill.

I don't know if the tax category I selected is exactly right but it accomplishes what I need. I don't expect to have any other transfers in to that IRA, in my lifetime, so I'm not concerned about it affecting future transactions.

Rocket J Squirrel

SomebodyInGNV said:

Independent of this situation, how will Fido report the rollover deposit? On a 1099-R? If so, what line? It seems to me that should be the one to use.

Probably on a Form 5498 line 2.

q_lurker

As stated above, transfers out are linked to 1099-R:Total IRA taxable distributions. There currently is no tax line linked to transfers in. What tax category should I assign so the rollover is characterized properly?

My thought is that you would want that same category used for the transfer back in.  But you don't want all transfers in to have that category.

What I would try:

• Go ahead and make your transfer back in as an entry in your checking account. 
• After that entry is created, right-click on the transaction, and select the Tax Line Assignment option.  There you can identify that the desired tax line for that specific transaction is the 1099-R Total IRA line (same line used for the transfers out). 
• I believe selection there will override the tax line assignment used for the overall account (the transfers inbound to the IRA). 

Hope that helps (and keeps it simple).

SomebodyInGNV

> @q_lurker said:
> * After that entry is created, right-click on the transaction, and select the Tax Line Assignment option.  There you can identify that the desired tax line for that specific transaction is the 1099-R Total IRA line (same line used for the transfers out). 
> * I believe selection there will override the tax line assignment used for the overall account (the transfers inbound to the IRA).

I was unaware of that override capability. That's useful information. I think that allows me to leave the account-level setting blank.

Thanks.

Edit: I tested that and it works. In this case I can set the tax line only from the checking account, not on the transfer within the IRA account.