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Getting tax planner to work with IRA distributions

h stansfield

I'm just retired and transitioning from salary income to IRA + Social security income. Based on some other discussions in here, I have set up a monthly sale+withdrawal/transfer from my IRA at Vanguard to my checking account, with Vanguard witholding federal income tax. What's funky is that the tax planner is not showing the future income correctly—in the lower box the 'annual total' is correct, but it doesn't match the 'taxable IRA/Pension distributions' line.

On the tax side, under 'other withholding', it looks like it is subtracting the future withholding amounts rather than adding them, which skews the tax planner to indicate that I will owe at the end of the year, while I think I should be close to even.

How to fix?

Quicken Classic R56.9

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Jim_Harman

It is a bit tricky to get IRA distributions to be recorded correctly in Quicken so that the tax implications are captured. Basically any tax withholding must be recorded in the taxable receiving account. Here is a "cheat sheet":

In the taxable receiving account:

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

2) Split the category:

Line 1 of the split: Category = transfer from the IRA account for the gross amount...a positive number.
Line 2 of the split: Category = the Fed tax withholding category that you use...a negative number.
Line 3 of the split: Category = the State tax withholding category that you use...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.

In the IRA account: edit the account details and click on Tax Schedule. Make sure Transfers out is set to 1099R:Total IRA taxable distribution.

Delete any downloaded brokerage transactions for

The net distribution
The Fed taxes withheld
The State taxes withheld

h stansfield

I've done that, all good. It does appear the tax planner isn't doing it right, and I'm not sure why. It's showing the future transactions as negative withholding for some reason, so my net for the year is showing negative withheld..and a bunch of tax owed, which I know is wrong.

NotACPA

@Jim_Harman I transfer out of my IRA the Gross amount, which is picked up by Q as the "Total IRA Distribution".

I then edit the txn in the taxable account to show the Net received as the deposit and record the splits as you explain. Perhaps a bit more editing, but the Gross taxable amount is then correct.

Jim_Harman

It works for me.

In your split Deposit transaction in the receiving account, did you enter the gross distribution as a positive number and the withholding amount as a negative number? That would be the correct way to do it.

You can check the 1099-R section of the Tax Schedule report to see that the amounts are recorded correctly. In that report, the withholding amounts should be negative.

Other variations on this may not work correctly.

Jim_Harman

There is a lengthy Idea post on this topic, which is now listed as Planned, so hopefully we will eventually see changes that make this process simpler. See

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

NotACPA

@Jim_Harman YES, in the taxable account split the Gross distribution (transfer) is positive while the Tax w/h is negative … resulting in the Net deposit into the taxable account register.

And I just checked my 1099-R "Total Taxable IRA Distribution", using my method, vs. Fidelity's records. They agree.

Jim_Harman

YES, in the taxable account split the Gross distribution (transfer) is positive while the Tax w/h is negative … resulting in the Net deposit into the taxable account register.

Sorry @NotACPA, I was responding to @h stansfield the OP, who said the withholding was showing as negative in the Tax Planner. Our posts overlapped.

h stansfield

Thanks guys, I think it's working now after some adjustments!

Minor question (kind of related): I filled out a W4-V to have tax withheld from SS, knowing I'll be in the '85% of my SS is taxable' group. Is the income tax withholding on SS done before or after Medicare B is taken out? My first SS payment is coming July 17.

Jim_Harman

What adjustments did you make that got it to work?

Were my instructions unclear or incomplete? I am trying to keep them short but not leave anything out.

h stansfield

I found that somehow (inadvertently) It had selected 'based on YTD daily average' instead of 'scheduled bills and deposits' (I don't think I clicked that, but it was selected).

I also set up SS as a 'paycheck' instead of as an 'income reminder'—to get the third wednesday of the month set up correctly.

I still think that Quicken needs to make it easier, more intuitive, more seamless, to set up retirement fund withdrawals/transfers into a bank account to track the tax situation—and to make it possible to have user input into the 'taxable social security', both either helping calculate what % of SS is to be taxable—and then a wizard to suggest which box to check on the W4-V for withholding would be awesome.

I literally just retired, so this year's taxes will be a mishmash of earned income for 5 months, SS for 6 months, IRA income, pension income, and some other fun things.

markus1957

FWIW, a scheduled income reminder with category splits used for deductions can be set up for the 3rd Wednesday of the month. That is how my Social Security payment is set up. I also have it set to automatically enter on that 3rd Wednesday. A Paycheck is not necessary.

Tax withholding will be based on payment before any deductions.