Problem with this year's Required Minimum Distribution

Boatnmaniac

NebularNovice said:

> @Boatnmaniac said:
> ...
> That all being said, setting the Transfer Outs in the IRA Account Details does work well with
> deposits to a checking or savings account when there is no tax withheld by the broker.  But when
> there is tax withheld a workaround is needed to properly capture the gross taxable amount of the
> distribution and this is perhaps the simplest and cleanest workaround.

After considerable experimentation, I have to disagree with Transfer outs working well. I entered a Sale (showed up as SoldX or course) from an IRA account with proceeds going to a checking account.  The IRA account setting specifies Transfers out associated with "1099R: Total IRA taxable distribution". No withholding involved in this test transaction.

As I expected from prior experience, the amount did not appear in the Tax Summary report. Thus it does not work well. I was somewhat surprised to find that the amount DID appear in the Tax Planner. Is that where you think it works well?

Sorry, I should have been more explicit:  You need to use the Cash Transferred Out Of Account transaction option. This more closely emulates what most brokers do:

1. Sell shares to fund the IRA distribution.
2. Proceeds from the sale are deposited to the cash balance of the account...not transferred out of the account.
   
3. A transfer out of account transaction to pull the funds from the cash balance and send them to the checking account.
4. And, for tax withholding:  Another transaction pulling cash from the cash balance to pay to the IRS.  This transaction will, also, not be captured in the Tax Reports.  (Because of the IRA account's deferred tax status no IRA expenses, are ever captured as a taxable event.)
   

If you enter the Sell transaction as a SoldX transaction it will not work properly, as you have noted.

Rocket J Squirrel

Boatnmaniac said:

 You need to use the Cash Transferred Out Of Account transaction option.

Has that actually worked for you? The common wisdom is that the IRA distribution must be entered as a DEPOSIT into the receiving account.

NebularNovice

I have to apologize also. I edited my previous comment to delete some extraneous stuff and accidentally deleted the statement that I had also tried selling with proceeds to the IRA account and then Cash transfer out of IRA account to the checking account (shows up as WithdrwX).

I just did it again to verify. Same result: IRA amount does not appear in Tax Summary, but does appear in Tax Planner.

Side note: my "broker" is Capital Group (American Funds). They record the transaction as a transfer to my bank -- which is what I tell them to do. They don't really have any choice because my account with them does not include a cash component. In previous years, I changed that to internal transfer to apply the workaround. I'll presumably do this year that when I have the true RMD transactions (instead of the test ones I'm doing now).

Rocket J Squirrel

NebularNovice said:

Cash transfer out of IRA account to the checking account (shows up as WithdrwX).

I just did it again to verify. Same result: IRA amount does not appear in Tax Summary, but does appear in Tax Planner.

You must enter the IRA distribution as a DEPOSIT into the receiving account.

This is the only way everything works.

Here is my Tax Summary report. The RMD appears at the bottom as a Transfer.

NebularNovice

> @Rocket J Squirrel said:
> You must enter the IRA distribution as a DEPOSIT into the receiving account.
>
>
> This is the only way everything works.Here is my Tax Summary report. The RMD appears at the bottom as a Transfer.

My comment was a reply to Boatnmaniac who says it works well as a transfer from the IRA to the receiving account, as it should based on the IRA account setting related to transfers out. (We could avoid much confusion if we could attach replies to specific messages.)

My experience is consistent with your SHOUTED statement, but he says otherwise. I'm just trying to establish whether the obvious way of entering RMDs works at all instead of having to use a workaround for Quicken's bug(s).

Boatnmaniac

Rocket J Squirrel said:

Boatnmaniac said:

 You need to use the Cash Transferred Out Of Account transaction option.

Has that actually worked for you? The common wisdom is that the IRA distribution must be entered as a DEPOSIT into the receiving account.

Yes, it does work for me....did it that way for years (not into a Checking account but into a manual Cash account and then into the Checking account.  Doing it this way allowed me to capture the tax withheld data that will otherwise not be captured in the Tax Reports and Tax Planner.  I also tested it, again, just prior to my previous post, but this time depositing it directly to a checking account...still works. BTW, there are other Quicken users who still use this method...including one of the participants in this thread and at least one other SU.

It was only in the last 2 years that I switched to entering the IRA distributions as Deposit transactions in the checking account.  I made the change because it is a little easier to use than using that dummy Cash account and and it captures the data in the Tax Reports in a way that more closely correlates to how that data is reported in the 1099-R reports we get from brokers.

Both methods are good workarounds but which is used is a personal preference.

Boatnmaniac

(UPDATED to show a more apples-to-apples comparison.)

Here is a test I just now completed...Tax Schedule Report, Tax Summary Report and Tax Planner:

• YELLOW SHADING:  This is the result of a single split category Deposit transaction being entered into the Checking account...pulling the $2000 gross IRA distribution from the IRA Account with $200 tax withheld.

• GREEN SHADING:  This is the result of a Cash Transferred Out Of Account transaction entered into the IRA Account...pushing a $1000 gross IRA distribution to the checking account...and a 2nd expense category transaction (for withheld tax) entered into the receiving Checking account.  (The tax withheld transaction must be entered into the checking account because a tax related expense category in a deferred tax account like an IRA will not be captured in the Tax Reports and Tax Planner.)
  

You will note that both scenarios properly capture the IRA distributions in both Tax Reports and in Tax Planner. Entering a Deposit transaction into the Checking Account might be the preferred method but entering a Cash Transferred Out Of Account transaction from the IRA Account along with a tax withheld expense category transaction in the Checking account also works.  (NOTE:  If the IRA distribution is made to a taxable brokerage account the split category Deposit transaction in the receiving account must be used.  The Cash Transferred Out Of Account will not work properly in this situation.)

NebularNovice

Thank you for the detailed example, Boatnmaniac. It is very useful in telling me why we disagree.

I believe the Tax Summary should report the IRA distributions in the Income section. The transfer section means nothing to me as far as reporting tax. Your example shows the Tax Summary does not report the IRA in income, but only as transfers. To me, that is wrong. Period. I shouldn't have to go classify the transfers to see where/if they should have been put into the tax return. Most transfers have been taken care of already. In my report, all other transfers are already included in the tax report to the extent they should be.

I admit I had never seen the Tax Schedule. Since I am not familiar with it, I find it difficult to see why the Form 1040 section of the report does not include all the items which feed into 1040. The provided help is absolutely no (help). I do see the IRA distributions in 1099-R, but I don't see why those amounts do not flow to 1040.

Anyway my main problem is the IRA distributions do not flow to the income section of the Tax Summary.

Boatnmaniac

NebularNovice said:

I have to apologize also. I edited my previous comment to delete some extraneous stuff and accidentally deleted the statement that I had also tried selling with proceeds to the IRA account and then Cash transfer out of IRA account to the checking account (shows up as WithdrwX).

I just did it again to verify. Same result: IRA amount does not appear in Tax Summary, but does appear in Tax Planner.

Side note: my "broker" is Capital Group (American Funds). They record the transaction as a transfer to my bank -- which is what I tell them to do. They don't really have any choice because my account with them does not include a cash component. In previous years, I changed that to internal transfer to apply the workaround. I'll presumably do this year that when I have the true RMD transactions (instead of the test ones I'm doing now).

I'm wracking my brain trying to figure out why you are not seeing it show up in Tax Summary.  You might want to check Tax Summary report customization to make sure it includes all Accounts, all Categories, all Transactions and for Transfers "Excludes self-transfers".

When my mother was still alive I managed her Capital Group accounts.  Yes, they several things differently than most brokerages.  What her broker did was to set up a Cash Management IRA account.  All of the cash transactions in and out of each of the individual mutual fund accounts (from securities Buys and Sells) would be transferred directly into/out of that Cash Management IRA account. 

And the IRA distributions to her checking account were also done from that Cash Management IRA account.  This allowed for cash to be held at Capital Group and for Capital Group to transfer cash out of that Cash management IRA account without needing to have any securities Sell transactions in it.  I don't know if that's something you might want to consider.

NebularNovice

Don't bother wracking your brain. Your own example does not show the IRA distributions where they should be in the Tax Summary account. That's what I am seeing in my setup also.

Thanks for the suggestion on a cash management account. I did consider that, but the current approach works fine without the extra step. The only benefit I can see would be that they could take the annual fee out of the cash management account, but then I would have to leave some $ in there. Instead they just take it out of one of the investment positions. (I really think they ought to waive it anyway for reasonably large accounts.)

Boatnmaniac

NebularNovice said:

Thank you for the detailed example, Boatnmaniac. It is very useful in telling me why we disagree.

I believe the Tax Summary should report the IRA distributions in the Income section. The transfer section means nothing to me as far as reporting tax. Your example shows the Tax Summary does not report the IRA in income, but only as transfers. To me, that is wrong. Period. I shouldn't have to go classify the transfers to see where/if they should have been put into the tax return. Most transfers have been taken care of already. In my report, all other transfers are already included in the tax report to the extent they should be.

I admit I had never seen the Tax Schedule. Since I am not familiar with it, I find it difficult to see why the Form 1040 section of the report does not include all the items which feed into 1040. The provided help is absolutely no (help). I do see the IRA distributions in 1099-R, but I don't see why those amounts do not flow to 1040.

Anyway my main problem is the IRA distributions do not flow to the income section of the Tax Summary.

Tax Schedule report is the better report for tax planning because it shows the data for actual IRS tax schedules.  It is the data in tax schedules that the IRS will be interested in and should be used to feed into the 1040 and Schedule A tax forms.

The Tax Summary report is a useful tool but it is not fully aligned with the IRS Tax Schedules, as you have observed regarding IRA distributions being Transfers instead of Income.  Everything pretty much aligns with the Tax Schedule except for the Transfers part. I think the logic behind that is that while the IRS considers IRA distributions to be income (for tax related purposes), IRA distributions in reality are not income.  They are simply transfers of cash assets from one account to another.  They affect Cash Flow but do not increase Net Worth so they are not income. Rightly or wrongly, that is the way the Tax Summary report works.  For me, the biggest benefit of the Tax Summary report is it reports the income and expenses grouped under categories (and transfers are a type of category), something which the IRS has limited interest in, but is certainly helpful to us.

I'm not sure what you mean by "the Form 1040 section of the report".  I am not aware of any Form 1040 in Quicken.  Are you referring to Tax Planner?  If so, the Tax Schedule report data (not the Tax Summary report data) do flow into Tax Planner under Other Income and under Withholding as shown in the last two pictures in my post above.

For what you are wanting to see it seems to me that you should perhaps be using the Tax Schedule report, not the Tax Summary report.

NebularNovice

The Form 1040 section of the report refers to the top of the Tax Schedule report. It is grossly incomplete because it excludes the data that flows from other sections. All it has on my report is Social Security. I am not interested in piecing together the various schedules to get a summary. That is why I use the Tax Summary.

I think Tax Center or Tax Planner are considerably better than Tax Schedule, but they don't display everything in one place as well as Tax Summary. I have to drill down to see the support on those while Tax Summary shows it by simply expanding a section.

You are, of course, correct that IRA distributions are not income. However Tax Summary should be reporting Taxable income, which definitely includes IRA distributions. On the other side, taxable income does not include a number of items which ARE income. Quicken mainly excludes those with a little nudging now and then, though it incorrectly includes more than it should (obviously).

I have never directly input data from Quicken to Turbo Tax because I prefer to take the data from 1099s, etc. instead of taking Quicken's numbers. Simply said, I don't fully trust Quicken numbers. There are a number of reasons why Quicken is inaccurate, including the one we're discussing. I do, of course, investigate whenever the tax form numbers differ from Quicken. In those cases, Quicken is usually wrong.

NebularNovice

That's neat. The system swallowed my comment. I'll try to reproduce it. I'll probably repeat some earlier stuff and leave stuff out, but ...

The Form 1040 section is the top section of Tax Schedule report. It is woefully incomplete because it does not show the totals which flow into Form 1040. I use Tax Summary because its format allows me to see everything without having to drill down. Another advantage is that I can easily control which period is included. I find this helpful in trying to estimate things. E.g., how is my tax situation YTD 2022 vs 2021 to the same date? I don't now how to do that in Tax Planner (or Tax Center). I do know how to do it in Tax Schedule, but it's useless.

You are, of course, correct that IRA distributions are not income. However it is a TAX summary and should include TAXABLE income, which definitely includes IRA distributions. Tax summary incorrectly includes some other stuff which is not taxable income, so it is a pretty flawed report.

I never directly import data from Quicken to Turbo tax because I prefer to take the data from 1099s, etc. I don't fully trust Quicken. I do compare Quicken data to the tax forms. Most of the time, the tax form is correct.

fanfare

[Removed - Beta]

fanfare

There's a difference between emphasis and shouting. Or has that been forgotten in this day and age ?

Boatnmaniac

NebularNovice said:

That's neat. The system swallowed my comment. I'll try to reproduce it. I'll probably repeat some earlier stuff and leave stuff out, but ...

The Form 1040 section is the top section of Tax Schedule report. It is woefully incomplete because it does not show the totals which flow into Form 1040. I use Tax Summary because its format allows me to see everything without having to drill down. Another advantage is that I can easily control which period is included. I find this helpful in trying to estimate things. E.g., how is my tax situation YTD 2022 vs 2021 to the same date? I don't now how to do that in Tax Planner (or Tax Center). I do know how to do it in Tax Schedule, but it's useless.

You are, of course, correct that IRA distributions are not income. However it is a TAX summary and should include TAXABLE income, which definitely includes IRA distributions. Tax summary incorrectly includes some other stuff which is not taxable income, so it is a pretty flawed report.

I never directly import data from Quicken to Turbo tax because I prefer to take the data from 1099s, etc. I don't fully trust Quicken. I do compare Quicken data to the tax forms. Most of the time, the tax form is correct.

Ah, OK, now I understand what you mean by "Form 1040".  I just started drawing SS not long ago and hadn't noticed it before then since SS transactions are the the only thing being shown there.  Actually, it seems to me that the Form 1040 section is simply a catch-all for tax related transactions that don't show up in one of the more specific Tax Schedule sections below it (Sch A, Sch B, Sch D, Int Income, W2, 1099-R).  I might be wrong but Tax Schedule was not designed to provide a summary of everything that feeds into Form 1040.  I think that's what the Tax Summary report was designed to do.

But if you want the Form 1040 section to be a summary of all the 1040 feeds and if you want the Tax Summary to show IRA distributions in the Income section instead of as Transfers you may want to consider suggesting these things as Product Improvements at Product Ideas - Quicken for Windows.  It will give other users the opportunity to review the proposal and if they agree with it to be able to vote for it.  I actually think that these 2 things might get a lot of support from other users. 

The Quicken Team does review Product Ideas for potential inclusion in their Development Plans and the more users who vote for an idea the more likely it is that at some point they might decide to do just that. 

If you do submit this as a Product Idea be sure to vote for it yourself.

Alternatively, until and unless Quicken makes these changes, you could also do what others do when they want Quicken's reports to do something they are not designed to do:  Export the reports to Excel and customize them there to your liking.

One last comment before I move on from this thread:  Quicken is not a tax software.  It was never intended to be a tax software and I seriously doubt that Quicken will ever try to be a tax software.  When it comes to taxes, at best, it is simply a tool to help document tax related transactions and to help in tax planning and in understanding the tax implications if changes will be made to income, expenses, etc..

Yes, there are things about it that can be and perhaps should be improved upon regarding the tax reporting and tax planning features in Quicken.  There are a number of proposed Product Improvements posted regarding this.  You might want to spend a little time searching for them, reading them and cast your vote for them if you agree with the proposals.

NebularNovice

> @fanfare said:
> There's a difference between emphasis and shouting. Or has that been forgotten in this day and age ?

Yes, there is a difference, but large font bold and context made it seem like shouting, a bit beyond emphasis. The big problem was lack of ability to connect reply to intended predecessor.