How can I get a taxable Roth contribution to appear in the Tax Schedule report?

nhuddleston

I have a category for taxable retirement fund distributions (maybe everyone has it, it's a "required" one). Transfers from retirement accounts (IRAs, 40x) to checking or brokerage accounts categorized this way show up as expected in the 1099-R section of the Tax Schedule report. A transfer I entered the same way from a traditional IRA to a Roth IRA, though, does not show up in the report. 

I tried creating a transaction report for this category, including all dates/accounts/tags/payees. Result: no transactions for this filter setting. Since these transactions are all associated with transfers, I tried switching to "include all transfers" in the Advanced report settings from the default "exclude all transfers." The result made no sense, including all sorts of transfers that had nothing to do with the retirement distribution category (maybe just ALL transfers).

I'm stumped. Is there a way to get this tradition IRA-to-Roth transfer to show up as it should in the tax report? Or even to just list all this category's transactions in a Category report?

QfM 6.5.3

jacobs

@nhuddleston 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. So before I get into the details, I'd encourage you to visit the Idea post requesting this functionality be added to Quicken Mac; please take a few seconds to visit this post and add your vote in favor of it. 

Quicken does not consider transactions in IRA accounts to be taxable, which is almost always correct. For example, dividends and capital gains in retirement accounts are not taxable, so Quicken correctly excludes them from the Tax Schedule report. But there are two types of transactions people typically make in their retirement accounts which are taxable events: withdrawing funds for a required minimum distribution, and withdrawing funds for a Roth conversion.

Here's the way I approach an RMD...

(1) In the traditional 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 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: (1) 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. (2) 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.

But the Roth conversion adds another wrinkle: the destination of the funds is not a banking account, as described above, but a Roth IRA account. If you do the steps above substituting the Roth account for the checking account, it won't work because the transaction created to generate taxable income is in a retirement account. So I'd do something similar but slightly different:

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

(2) In the traditional IRA account, create a transaction to Transfer the money to the Roth IRA 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.

(3) In the Roth IRA account, create a transaction to record the purchase of the security(ies), using up the cash balance in the account. 

As above, this gets the traditional IRA account and Roth IRA account the receiving account to have the correct dollar amounts; both accounts have a zero cash balance and the correct holdings. You've probably done steps 1 to 3. So now you need to perform the trick to get Quicken to count this as taxable income.

(4) In your checking account (or any non-retirement account), create a transaction with an Amount of zero. Go to the splits tab and add two split lines: (1) Use category "Personal Income:Taxable IRA Withdrawal", enter the amount of the traditional IRA withdrawal as a positive number; and (2) Use category "Adjustment" with the same amount as a negative number.

That zero dollar transaction creates taxable income out of thin air so it shows up in the Tax Schedule report, without affecting anything else. It's a hack, to be sure, but until the developers create some way to have IRA withdrawals show up in the Tax Schedule report, adding this transaction gets the job done. 

(Again, please visit this post and add your vote to have the developers create a more elegant way of handling taxable withdrawals from retirement accounts.)

Jim_Harman

[sorry, answer was for Windows]

jacobs

@nhuddleston 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. So before I get into the details, I'd encourage you to visit the Idea post requesting this functionality be added to Quicken Mac; please take a few seconds to visit this post and add your vote in favor of it. 

Quicken does not consider transactions in IRA accounts to be taxable, which is almost always correct. For example, dividends and capital gains in retirement accounts are not taxable, so Quicken correctly excludes them from the Tax Schedule report. But there are two types of transactions people typically make in their retirement accounts which are taxable events: withdrawing funds for a required minimum distribution, and withdrawing funds for a Roth conversion.

Here's the way I approach an RMD...

(1) In the traditional 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 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: (1) 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. (2) 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.

But the Roth conversion adds another wrinkle: the destination of the funds is not a banking account, as described above, but a Roth IRA account. If you do the steps above substituting the Roth account for the checking account, it won't work because the transaction created to generate taxable income is in a retirement account. So I'd do something similar but slightly different:

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

(2) In the traditional IRA account, create a transaction to Transfer the money to the Roth IRA 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.

(3) In the Roth IRA account, create a transaction to record the purchase of the security(ies), using up the cash balance in the account. 

As above, this gets the traditional IRA account and Roth IRA account the receiving account to have the correct dollar amounts; both accounts have a zero cash balance and the correct holdings. You've probably done steps 1 to 3. So now you need to perform the trick to get Quicken to count this as taxable income.

(4) In your checking account (or any non-retirement account), create a transaction with an Amount of zero. Go to the splits tab and add two split lines: (1) Use category "Personal Income:Taxable IRA Withdrawal", enter the amount of the traditional IRA withdrawal as a positive number; and (2) Use category "Adjustment" with the same amount as a negative number.

That zero dollar transaction creates taxable income out of thin air so it shows up in the Tax Schedule report, without affecting anything else. It's a hack, to be sure, but until the developers create some way to have IRA withdrawals show up in the Tax Schedule report, adding this transaction gets the job done. 

(Again, please visit this post and add your vote to have the developers create a more elegant way of handling taxable withdrawals from retirement accounts.)

nhuddleston

@jacobs, thanks for the advice. I was able to work the Roth conversion into the Tax Schedule report with your step 4 hack. To avoid inflaming my accounting OCD by littering unrelated accounts with bogus transactions, I created a bogus brokerage account specifically for this conversion trickery. That will be helpful until this oversight is fixed in Quicken. Vote added to the feature request.

For our regular retirement account distributions (a few years out from RMDs, yet ), I used to do an adjustment with a bogus "black box" category that had the effect of your first step 3, but I haven't had to do that for a couple of years. Now I just record the sale of shares in the IRA/4xx, then transfer the proceeds to a checking or brokerage account via a payment transaction with my tax-related category assigned. Those show up in the Tax Schedule with no adjustment hack required. It's only with the Roth conversion that I've run into this problem. 

The inability to get a valid Transactions by Category report for this category is puzzling. Now, with the default setting that excludes transfers, the bogus adjustment transaction for the Roth conversion makes a solo appearance. That makes sense, as all of the other transactions with the category are transfers. But if I check "include all transfers," it lists literally all transfers in the date range, not just the ones with the selected category. And tallies their contribution to the reported total as $0. That doesn't make sense. I could probably get a no-transfer report to work by implementing your first step 3, but since the Tax Schedule report includes my categorized transfers correctly, it feels like other reports should, too, no tricks required.