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RMD withdraw from IRA (non-tax) to Trust (taxed) account

Stephen R

I'm doing my RMD withdraw but it is not showing up in the tax reports. My RMD is say $20,000 with 20% Fed WH and 10% State WH. In the IRA acct I do a gross $20,000 "Cash transfer out of acct" to the Trust (taxable) account. Now I open the Trust account, there is the Xin $20,000 amount. When I open it with "edit" button it does not allow me to do the split Fed & State WH lines? (I have a 401K account that I need to do the same.)

What am I missing?

Steve

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Accepted answers

Jim_Harman

Here is a "Cheat sheet" for entering IRA distributions. Please see the bold section below.

In the IRA, click on the gear at the top right and select Edit account details. Click on Tax Schedule and set Transfers out to 1099R: Total IRA taxable distrib., like this:

For the taxes to be recorded properly in Quicken, the transfer must be entered as a transaction in the receiving account. It can be a banking or an investing account, but it must be a taxable account, not another IRA for example. If there is already an Xout transaction in the IRA account that transfers money to the taxable account, note the amount and delete it. Do not try to edit the receiving end of the transfer.

In the receiving account:

1) Enter a Deposit transaction for the net amount of the RMD as a positive number.

2) Split the category for this transaction as follows:

Line 1 of the split: Category = the IRA account name in [square brackets] and the gross distribution amount, entered as a positive number.
Line 2 of the split: Category = the Fed taxes withholding category that you use, entered as a negative number.
Line 3 of the split: Category = the State taxes category that you use, also as a negative number.
Total of the split: Must equal the net amount of the deposit.

If you receive the distributions regularly, you can set this transaction up as an Income Reminder (not a Transfer reminder). If you Enter this reminder before the transactions are downloaded, the download in the receiving account should match the transaction that is already there. If your broker downloads separate transactions for the net distribution and and the withholdings, you may need to delete the downloaded transactions.

In the IRA account: Delete any downloaded brokerage transactions for

The net distribution
The Fed taxes withheld
The State taxes withheld

With this setup, the taxable income will be shown in the “1099-R Total IRA Taxable distrib.” and the tax withholding in the withholding sections of the Tax Schedule report.

All comments

Jim_Harman

Here is a "Cheat sheet" for entering IRA distributions. Please see the bold section below.

In the IRA, click on the gear at the top right and select Edit account details. Click on Tax Schedule and set Transfers out to 1099R: Total IRA taxable distrib., like this:

In the receiving account:

1) Enter a Deposit transaction for the net amount of the RMD as a positive number.

2) Split the category for this transaction as follows:

Line 1 of the split: Category = the IRA account name in [square brackets] and the gross distribution amount, entered as a positive number.
Line 2 of the split: Category = the Fed taxes withholding category that you use, entered as a negative number.
Line 3 of the split: Category = the State taxes category that you use, also as a negative number.
Total of the split: Must equal the net amount of the deposit.

In the IRA account: Delete any downloaded brokerage transactions for

The net distribution
The Fed taxes withheld
The State taxes withheld

With this setup, the taxable income will be shown in the “1099-R Total IRA Taxable distrib.” and the tax withholding in the withholding sections of the Tax Schedule report.

Stephen R

Finally, I see… So simple. I had the account setting correct. But trying everything as a transfer from the sending account first. Rather than working it as a Deposit in the RECEIVING account.

Many thanks,

Steve

MollyG

Jim

I have this part of the IRA distribution working correctly now, though it doesn't capture the taxable distribution as income in the income/expense report. Is there any way to do that?

Second question - when I make contributions to my SEP or Roth, is there a proper protocol to follow so that this also shows up appropriately on the right tax schedule. I'm never quite confident in the appropriate action but I have transfered between these accounts alot

Third question, is there a correct way to record transfers from brokerage MM accounts to checking accounts. These dollars aren't taxable but they are often combined with the two above scenarios as uncategorized income in the income and expense report.

All I really want to be able to do is track my income (taxable, not taxable), my expenses and monitor my overall cash flow now that I'm officially retired. I have a retirement plan and budget but it would be nice to see how I am doing against it as the year progresses. I'd thought I'd do this just using income and expense comparisons - as I have done for the last thirty years - but perhaps there is a better/easier way.

Appreciate your thoughts

Kathy

Jim_Harman

@MollyG

What account is your IRA distribution going to? The default Income and Expense by Category account only includes banking accounts. In my case the IRA distribution is going to a taxable investing account so it does not appear on that report, because neither the IRA or the taxable account is included in the report. If I customize the report to include the taxable investing account, the IRA money is there, along with the dividend income in that account. Is that your issue?
Is this a contribution from a taxable account and not a conversion (IRA to Roth) or rollover (IRA to another IRA)? If so, go to the destination account and make sure the Tax Schedule for Transfers in is set correctly. Also, when you record the transaction, enter it in the taxable account.
The income and expense report looks at the flow of money, not whether it is taxable or not. If you don't want transfers from taxable investing accounts to your checking account to show in spending reports, the easiest way is to include the investing account in your report account selection. Including the taxable investing account in the report will also include its dividends and other income, which it sounds like you want.

MollyG

The IRA contribution is going directly into my bank checking account. I've played around with which accounts are included in the income and expense report and can get it to show up as uncategorized and that makes sense. The deposit took the gross distribution straight from the the SEP account. I've played around with excluding/including internal transfers. The problem here is that what might work for this situation, may not work for others. Right now, internal transfers funding the SEP for 2023, the last year for the business, and funding our Roth's, also show in uncategorized. Hence the other questions. Let me make the changes you suggest and see if I can't clear that bit up.

Appreciate you!

MollyG

Jim

There isn't a SEP contribution option in the tax schedule, so I selected SIMPLE contribution. I guess I could have selected IRA contribution but thought maybe I should retain the self employment aspect of the contribution.

What option on the tax schedule should be used for contributions to a regular ROTH? A bit confusing as neither contributions nor withdrawals have tax implications.

We may well do a Roth conversion at some point in time. Not sure that impacts any of the above decision making but thought I'd throw it out there anyhow.

Thanks again

Jim_Harman

For the SEP, there are Form1040:SEP Deduction, self and spouse line items; use those.

For Roth contributions there is no tax implication for contributions so leave the Transfers in line item blank.

For Roth conversions, you must move the money through a taxable account in Quicken for the tax implications to be picked up correctly. In the taxable account, you can enter a Deposit for the amount converted and the traditional IRA as the source Category, followed by a Withdraw for the same amount and the Roth account as the destination category.

Hopefully Quicken will make all this easier at some point. See this lengthy Idea discussion, now thankfully in the Planned state, for more info.

https://community.quicken.com/discussion/7864626/improve-handling-of-ira-distributions-including-qcds-and-roth-conversions

MollyG

Thanks Jim - helpful. So for a Roth conversion if the monies in the IRA account are sold and then deposited into my Vanguard settlement account (inside a taxable account) prior to be added to the Roth, I should be fine just following the electronic downloads??

Jim_Harman

That would work if the downloads were all correct, but what you record in Quicken does not need to exactly match what was downloaded or what happened in real life. In the case of a Roth conversion, it may be necessary to tell Quicken something different from what actually happened.

For example, if both accounts are at Vanguard and you want the investments to remain the same, they can do a Roth conversion by transferring shares directly from an IRA to a Roth account. This has the advantage that the money stays invested through the transfer, and because it is a direct transfer, there is no question about whether it was a Roth conversion or a cash distribution followed by a contribution to the Roth.

What gets downloaded in this case would probably be shares Removed from the IRA and Added to the Roth.

What you would record in Quicken would be shares sold in the IRA, cash transferred to the taxable account and then to the Roth account, and shares bought in the Roth, all on the same day. You would delete the downloaded Removed and Added transactions.

Jimbert

When I enter the deposit into my checking account as a split transaction coming from my annuity IRA account, Quicken says I made a contribution into my IRA account before April 15 deadline. Then it asks me to identify the tax year of the contribution and offers me 2023 or 2024. Then in the IRA account, it asks for a valid date and doesn't accept the actual date of the transfer. The IRA is set up as a traditional IRA, tax deferred, and not a single mutual fund account (since it is not a mutual fund account).