How to account for Investment withdrawal

Question

I've used Quicken for over 25 years. I've had my retirement in an investment account, and have started drawing from that yearly. When I withdraw, I enter the transaction from the retirement account using a XOUT (cash transferred out of account) transaction in the "Transfer account" field with the new proceeds going to my bank account. Works fine. I then go to the bank account to edit the bank's record to change it to a split transaction. I choose to split, change the first split line to reflect the NET deposit, and add a split line to record to an account called "Tax:Withholding" with the amount the investment broker sent directly to the IRS, then press the (Adjust) token.

Problem I have is the draw does not show up as any kind of income! the IRA account shows a transfer of cash, and the bank shows a deposit, but I have no line item showing up as a IRA draw, hence nothing to report it on a Quicken Income report. I do not have any IRS tax reporting settings for my accounts. I was very frustrated when I went to a year-end report, and the IRA draft did not show up any where!

How are others dealing with IRA withdrawals so they make sense in Quicken reports?

Jim_Harman · Answer

If you want your IRA distributions to show up as income on spending reports, click on the gear in the report to open the report customization. On the Accounts tab,  exclude the IRA account and on the Advanced tab select Exclude internal under Transfers.

Frankx · Answer

Hi @PrincetonBrat470,

Basically, the IRA withdrawals are not showing up as income, because they aren't income from an accounting perspective - even though they are taxed when you make those withdrawals.

If you consider the transactions that occurred as the IRA was being funded - you took funds that were already taxed (i.e. - as part of your salary or wages) and deposited them in a special account (IRA account) and on your tax return you were able to deduct those IRA contributions on your federal tax return.  So the funds in your IRA account were previously recorded in Quicken as salary income but you were able to defer tax on them.  Once you start taking withdrawals from the IRA, those withdrawals aren't income to you because you already recorded them when they were earned, but they are now taxable, because the taxes on them were deferred by placing them in an IRA account.  They are "taxable income" for tax purposes only because you deferred the taxes, but you already recorded them as "book income" when you earned them

Let know know if you have any followups.

Frankx