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Early withdrawal penalty

aLfGordon

I had to pay an early withdrawal penalty. How do I account for that penalty in the sale of the shares. i.e., I sell 1000 shares @ $10, and owe $2000 in penalty. Without the penalty I would net $10000, but as seen I only get $8000. I entered the transaction sale and put the $2000 in the commission box. Now it skews my monthly income as a loss showing the $2000 as _RLZDGAIN, thus showing a loss in income for the month.

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Tom Young

I'm not exactly following along with you here. From a pure accounting standpoint if you buy something for $10K and sell it for $8K, that's a realized loss of $2K. You've not provided any information as to what type of Account this is or if the penalty as actually coming from the early sale or if the penalty is associated with the actual withdrawal of the cash.

aLfGordon

Monies were taken from an investment which had a 20% penalty. So shares had to sold at X - penalty.

Tom Young

"Monies were taken from an investment which had a 20% penalty. So shares had to sold at X - penalty. "

Why don't you tell me what you think is the proper accounting is here. What do you thing that penalty should be classified as, and why?

aLfGordon

That is what I am asking - I don't know. I did not want a hit on income, i.e. loss of interest. If I put in a s a (_INTEXP) expense, I get hit as a monthly expense. I tend to opt for option 2 as I'd rather see my income flat in lieu of the added expense that month. I currently have it that way (_INTEXP), but the expense does not show up in my expense graphs…

q_lurker

I would think selling for the $10K, then a MiscExp or a Withdrawal transaction for the $2K. I think the Feds get that penalty, so I’d probably create a Taxes:Federal:Penalty category for that expense.

aLfGordon

I actually think the insurance company gets the $, but your idea is well taken. Thank you

Tom Young

Unless you are using Quicken's ability to classify transactions for tax purposes and putting them on the Tax reports, it really doesn't matter how you account for this transaction in your own personal accounting records. Your "Overall Total" on a Spending report is exactly the same either way so do what pleases you.

Not sure what "graph" you're referring to here but I could get that to show up in a Spending report, with graph. You may have to make sure that the _IntExp is selected on whatever you're looking at.

q_lurker

Upon further review:

The early withdrawal penalties I see are IRS imposed, based on age, at 10%. There are exceptions that can be applied, such as medical needs. This penalty does go to the feds

I suspect the other 10% is ‘normal’ withholdings, in which case it counts as taxes you have ‘paid’ for 2023.

With that in mind, I’ll edit my advice:

Sell the shares for the $10K
XOut the $10K as a transfer to your Checking account (or wherever)
Edit the Checking account side of the transfer to be a split transaction with the $10K in, -$1K out as prepaid 2023 taxes, and -$1K out as the federal penalty for a net deposit to the checking account of $8K.

But all this requires you to really know what money is really going where.