Recording transfers from retirement to checking as taxable income

PrettyQuickSmitty
PrettyQuickSmitty Member ✭✭
edited April 12 in Investing (Mac)
I have a routine (monthly) transfer from a 'qualified' retirement account to my checking account, but I cannot seem to understand how to tell Quicken (Mac) that this distribution is now taxable income.

Best Answer

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Answer ✓
    You're correct; there is no straightforward way to do this in Quicken Mac. I created an Idea post requesting such a feature, and I encourage you to take a few seconds to click this link and add your vote for it (in the yellow box, click the gray arrow under the vote counter).

    Meanwhile, as detailed in that thread, you need a 'hack' to tell Quicken to treat the transfer to your checking account as taxable income. In your checking account — not the retirement account — you need a transaction with two split lines: one using the category for taxable income, and the other in the opposite amount using the "Adjustment" category. You could do this as a zero dollar transaction with offsetting splits, but here's an example of what this looks like as two split lines added to the actual transfer transaction:



    The first split line here is the transfer of money from an account called "IRA". The second split line categorizes the transfer amount as taxable income, using the Taxable IRA Withdrawal category. The third split line, with the amount as a negative number, set the category Adjustment. What makes this hack work is that the Adjustment category doesn't show up in any report as income or expense; it simply disappears. In professional accounting, making money disappear like this would be a no-no, but here it works to let us double-count the amount, once as a transfer and a second time as income. And again, this split needs to be done in a non-retirement account, because Quicken (properly) ignores income in retirement accounts on a tax report. (In this screenshot, the transaction is done as a Payment/Deposit transaction in a Brokerage account; it would be the same in a checking account.)
    Quicken Mac Subscription • Quicken user since 1993

Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Answer ✓
    You're correct; there is no straightforward way to do this in Quicken Mac. I created an Idea post requesting such a feature, and I encourage you to take a few seconds to click this link and add your vote for it (in the yellow box, click the gray arrow under the vote counter).

    Meanwhile, as detailed in that thread, you need a 'hack' to tell Quicken to treat the transfer to your checking account as taxable income. In your checking account — not the retirement account — you need a transaction with two split lines: one using the category for taxable income, and the other in the opposite amount using the "Adjustment" category. You could do this as a zero dollar transaction with offsetting splits, but here's an example of what this looks like as two split lines added to the actual transfer transaction:



    The first split line here is the transfer of money from an account called "IRA". The second split line categorizes the transfer amount as taxable income, using the Taxable IRA Withdrawal category. The third split line, with the amount as a negative number, set the category Adjustment. What makes this hack work is that the Adjustment category doesn't show up in any report as income or expense; it simply disappears. In professional accounting, making money disappear like this would be a no-no, but here it works to let us double-count the amount, once as a transfer and a second time as income. And again, this split needs to be done in a non-retirement account, because Quicken (properly) ignores income in retirement accounts on a tax report. (In this screenshot, the transaction is done as a Payment/Deposit transaction in a Brokerage account; it would be the same in a checking account.)
    Quicken Mac Subscription • Quicken user since 1993
  • thanks.... not so elegant, but a workable work-around. I'll follow your link and chime in.
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    thanks.... not so elegant, but a workable work-around.
    Yup, I never claimed it was elegant! ;) But it's a way to get the job done, until the developers give us a better way.
    Quicken Mac Subscription • Quicken user since 1993
  • mtimkovich
    mtimkovich Member ✭✭
    Thank you Jacobs. I used a variant of this scenario (the last two lines) to record taxable income related to a ROTH conversion.
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