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Entering a Category & Transfer Simultaneously

All4Dough

Is Quicken still planning to do away with the ability to both select a category and transfer in the same transaction? I recall reading they will deprecate this ability in the future.

I’m setting up a brand new quicken data file and want to ensure I’m using a future proof way of entering certain transactions.

For example, if I’m making a RRSP/401k contribution, one way would be to select the category “RRSP Contributions” and in the same transaction select a transfer to my RRSP account. This ensures the contribution is categorized properly for any future reports while also transferring the funds to my investment account.

The other way, would be to categorize the transaction as a RRSP Contribution but then use split entries where I would add a split that shows the transfer to the RRSP Contributions in the category field and then another split with a balance adjustment for the same amount to offset. This was a workaround used in windows version of quicken to avoid entering both a category and transfer in the same transaction.

I prefer the first method as it’s clean and quick but want to ensure its future proof. Any suggestions would be appreciated.

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Comments

jacobs

@All4Dough Yes, it's correct that Quicken Mac transactions should not have both categories and transfers, because that goes against the rules of accounting. (I don't believe anyone from Quicken has made any statements about this recently, so I don't know what it current blocks or will block in the future.)

if I’m making a RRSP/401k contribution, one way would be to select the category “RRSP Contributions” and in the same transaction select a transfer to my RRSP account. This ensures the contribution is categorized properly for any future reports while also transferring the funds to my investment account.

That's exactly what you should avoid, because a transaction with both a category and a transfer is what Quicken has previously stated will at some point not be allowed. 😉 A transfer to your retirement account is not, accounting-wise, an expense.

The other way, would be to categorize the transaction as a RRSP Contribution but then use split entries where I would add a split that shows the transfer to the RRSP Contributions in the category field and then another split with a balance adjustment for the same amount to offset. This was a workaround used in windows version of quicken to avoid entering both a category and transfer in the same transaction.

I use an approach like this in Quicken Mac when I'm making a taxable withdrawal from a retirement account, such as a Roth conversion or an RMD, where I need to both transfer funds from a tax-deferred account to another account and also categorize it as taxable 1099-R income. The "hack" is to enter the transfer in one split, enter the same amount in a categorized split, and enter an offsetting (negative) amount in a third split using the special category "Adjustment" which doesn't show sup as income or expense in any reports.

But before you do the hack approach, my question is: why you feel you need to categorize the contribution to your retirement account? I don't think you do. Is your goal to be able to track the amount you've contributed (transferred) to the retirement account? In reports, and in budgets, you can include selected transfers if you want to see them as pseudo-expenses for more of a cash flow viewpoint. (If you want on how to do so, just post back and I'll be happy to explain.)

All4Dough

But before you do the hack approach, my question is: why you feel you need to categorize the contribution to your retirement account? I don't think you do. Is your goal to be able to track the amount you've contributed (transferred) to the retirement account? In reports, and in budgets, you can include selected transfers if you want to see them as pseudo-expenses for more of a cash flow viewpoint. (If you want on how to do so, just post back and I'll be happy to explain.)

This is a really good point, never even thought about this. So to take it one step further, is there a reason we can't solely on the transfers as the category for Retirement Account withdrawals as well? Since transfers can be included in reports, wouldn't a withdrawal from a Retirement Account by way of a transfer to say my chequing account not be just as effective?

jacobs

@All4Dough The issue with withdrawals from retirement accounts has an added wrinkle. Unlike a contribution to a 401k or IRA, a withdrawal from those accounts is taxable income. So if you want to utilize Quicken’s tax reports, the amount withdrawn needs to be categorized as a taxable retirement withdrawal. (If you don’t utilize the Quicken tax reports, and use the 1099s you receive for your tax preparation, then you don’t need to jump through the extra step of the “hack” to categorize the income in Quicken.)

Mark Rasmussen

Same question, but using my HELOC (and mortgage and car loan).

When the bank that services my HELOC takes a principal payment, I want that transaction to be categorized as "Mortgage" while also transferring the money into my HELOC account at the bank, so that I can also track my principal balance owing. I do NOT like the workaround of using an "adjustment" account. And yes, I have a background in accounting and finance.

The same idea applies when I am having my monthly mortgage payment and my car loan withdrawn from account.

Mark Rasmussen

I am curious, however, what solution you might suggest that doesn't use that mythical "adjustment" account. If I am creating a split transaction, and using the transfer entry to link the transaction to between my checking and my HELOC account, what are the additional two lines in that split to account for the mortgage expense?

jacobs

The Adjustment category isn't mythical, but I consider using it to create a transaction which is both a transfer and a category — something which does not exist under the rules of accounting — to be a hack. (Incidentally, using the Category=Transfer — without any account name specified for a linked transfer — functions identically to Adjustment.)

Again, the issue is that a transfer of funds from one account to another is not an expense. If you have a mortgage, the principal payment on your mortgage is a transfer reducing your checking account total and reducing the liability total of your mortgage account.

But of course, from a cash flow standpoint, it feels like an expense each month. This is why Quicken Mac allows you to include selected transfers in both reports and budgets. And if that's not enough, then you can use the "hack" of creating a one-sided expense transaction, using the Adjustment account to balance out the transaction.

If I am creating a split transaction, and using the transfer entry to link the transaction to between my checking and my HELOC account, what are the additional two lines in that split to account for the mortgage expense?

It would look like this: