Should Roth 401k contributions be categorized as "_401Contrib"?

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AaronD
AaronD Member ✭✭
edited August 2023 in Investing (Windows)

In the Tax Summary report, my Roth 401(k) contributions are collecting under the "_401Contrib" category, as negative income. No differant than my spouse's regular (not Roth) 401k contributions that collect under "_401ContribSpouse". I don't think that is right. In Tax Planner, the same Roth 401k transfers show as negative values in the "Wages and Salaries - Self". Shouldn't it be different for Roth vs traditional 401k?

Using Quicken Windows Premier R50.16

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  • Q97
    Q97 Member ✭✭✭✭
    Answer ✓
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    Under Account Details for the Aaron's Roth 401(k) account, what is the Account type? If it's a 401(k), Quicken may think your deposits into it are _401Contrib. In my case, I have my Roth 401(k) account set up in Quicken as a Roth IRA since there is no proper Roth 401(k) account type in Quicken. Since you also have a Roth IRA, as a test redirect your Roth paycheck deduction into your Aaron Roth IRA account to see if Quicken handles the taxation correctly then. If it does, you can consider creating a Roth IRA account to hold your Roth 401(k) contributions.

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    Answer ✓
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    @AaronD - There have been several discussions about Roth 401(k) issues ever since the Roth 401(k) option was added to the Paycheck Wizard stub earlier this year. One thread that summarizes the main issues fairly well:

    As @Q97 posted above and as is stated in this referenced thread, when using the Paycheck Wizard stub and having Roth 401(k) contributions go into a separate account, using the Roth 401(k) deduction option in the Paycheck Wizard stub does not work with Tax Planner. Instead, set up a Roth IRA account for the Roth 401(k) holdings and paycheck deductions (you can name the account "Roth 401(k)" or something similar) and use that account in the Paycheck Wizard instead.

    Also, a Moderator posted in this referenced thread that she was able to duplicate the Roth 401(k) issues discussed in that thread and has reported them to the Quicken development team. So, hopefully, there will be a fix for all the Roth 401(k) issues coming. But until that fix occurs, IMO your best workaround option at this time is to use the Roth IRA account option.

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

Answers

  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    edited July 2023
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    Quicken does not really support Roth 401(k)s, it treats regular and Roth contributions, balances, and withdrawals the same unless you use some rather clunky workarounds. For more information see this Idea post.

    QWin Premier subscription
  • Q97
    Q97 Member ✭✭✭✭
    edited July 2023
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    A recent release added a new Roth 401(k) option in the After-Tax Deductions section of the Paycheck dialog. How useful this is to you probably depends on how you track your 401(k) contributions. If your 401(k) contains only Roth contributions, then this might work fine for you. If your 401(k) account contains a mixture of contribution sources (say, Employer Pre-Tax and Roth), then this option is not as useful since Quicken cannot properly track the different tax impacts of these sources when they are comingled in the same Quicken account.

    To work around this, you can split your "physical" 401(k) into two Quicken accounts, a 401(k) for the pre-tax contributions, and a Roth IRA for the Roth contributions. This is a more faithful model of the taxation, but it is more manual work. Automatic download of the transactions will not place the different source contributions in the proper Quicken accounts, which is something you will have to correct manually. Also, any reinvestments will have to be similarly reallocated to the proper Quicken accounts. This is the option I have chosen so I can get more accurate tax impacts of contributions and future withdrawals. To me, the benefits are worth the extra manual effort.

  • AaronD
    AaronD Member ✭✭
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    I should have mentioned in the original post: 1) I am using the newly added paystub feature for Roth 401k, and 2) I have setup dual Quicken accounts for my 401k: the regular vanilla 401k where the employer match is deposited, and another Roth 401k account that receives my contributions.

    So I guess I'm asking is do I have a quirk in my data or configurations / does it work perfect for others?. Or is the "new" Roth 401k feature in Quicken just a paystub feature but if used will mess up the tax side reporting in Quicken?

  • Q97
    Q97 Member ✭✭✭✭
    Answer ✓
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    Under Account Details for the Aaron's Roth 401(k) account, what is the Account type? If it's a 401(k), Quicken may think your deposits into it are _401Contrib. In my case, I have my Roth 401(k) account set up in Quicken as a Roth IRA since there is no proper Roth 401(k) account type in Quicken. Since you also have a Roth IRA, as a test redirect your Roth paycheck deduction into your Aaron Roth IRA account to see if Quicken handles the taxation correctly then. If it does, you can consider creating a Roth IRA account to hold your Roth 401(k) contributions.

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    Answer ✓
    Options

    @AaronD - There have been several discussions about Roth 401(k) issues ever since the Roth 401(k) option was added to the Paycheck Wizard stub earlier this year. One thread that summarizes the main issues fairly well:

    As @Q97 posted above and as is stated in this referenced thread, when using the Paycheck Wizard stub and having Roth 401(k) contributions go into a separate account, using the Roth 401(k) deduction option in the Paycheck Wizard stub does not work with Tax Planner. Instead, set up a Roth IRA account for the Roth 401(k) holdings and paycheck deductions (you can name the account "Roth 401(k)" or something similar) and use that account in the Paycheck Wizard instead.

    Also, a Moderator posted in this referenced thread that she was able to duplicate the Roth 401(k) issues discussed in that thread and has reported them to the Quicken development team. So, hopefully, there will be a fix for all the Roth 401(k) issues coming. But until that fix occurs, IMO your best workaround option at this time is to use the Roth IRA account option.

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
    edited July 2023
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    I reported this issue back when they first released the new feature. If you have $0 under the traditional (pre-tax) contribution, then the new after-tax item gets counted as _401Contrib and goes through the special hidden account that causes it to be deducted.

    To avoid this, you can skip using their new after-tax category and instead just use your own "other after-tax contribution" and name it whatever you want. For category, put [401k Account]/Roth401KContrib. This does exactly the same thing their new "feature" does (add a tag to the transaction that you can then run a report against) but does not deduct it pre-tax.

    Your $0 pre-tax contribution will have no category assigned in the paycheck until you enter it, at which point it will just put the account the check was deposited into (you have to put your 401K account in initially during paycheck setup so the match goes to the right account, but then it will disappear and eventually get filled with your bank account to prevent showing up as uncategorized).

    This workaround even makes it show up in tax planner under roth (but not under 401k pre-tax deduction) so that must be based on the tag Roth401KContrib

    I've been waiting for them to "fix" this but I'm just going to use the workaround above as who knows if/when that will ever happen.

This discussion has been closed.