Help with Req'd Min Distribution ("RMD") transactions from self employed pension plans ("SEP")

Harensjm

On Quicken for Windows latest edition. In January of 2024 I took my first RMD. I had three separate RMD distributions. (One from each of three separate SEP accounts.) I had the distributions deposited directly into a brokerage account with the same manager as the three SEP accounts. When I downloaded the transactions for all 4 accounts into Quicken, it handled everything perfectly in terms of withdrawals, deposits etc. The "category" in each of the three SEP account withdrawal transactions was the deposit account.

Here is the problem. I would like each year to have a record of my RMDs just like my salary income or my SS income. When those latter income transactions hit my bank's checking account, they are recorded as "salary" or "social security" as sub-categories of an income category named "Compensation." I can then print out my income and expense reports at the end of the year and see all of my income and expenses by the various categories and subcategories. However, now when I go to print that out for 2024 there is no record of the RMDs as any form of income because of the direct deposit of three RMDs into that 4th brokerage account.

Is there a better way to record the transactions where the RMDs come out of the SEP accounts and are deposited in a single account such that somewhere there is an income category used for "RMD income." Maybe some split transaction or use a new account called "RMDs"

Jim_Harman

If a transfer is entered in a tax deferred account, it should not appear in the Tax reports or Tax Planner. In your case both accounts are tax deferred so you should be OK.

Try it and see

NotACPA

Go into each of those SEP accounts and set the Tax Attribute for the withdrawals as "1099-R Total IRA Gross Distribution".

Then, either a Tax Schedule report or an Income & Expense report can be the starting point for what you want to see.

And when you say "they are recorded as …" by whom? You, in Q, or the brokerage? Because in QWin, a transfer can't have a category other than the name of the "transferred to" account, so I'm unclear how your RMDs are being recorded.

Jim_Harman

It is a bit tricky to record IRA distributions in Quicken so that the tax implications are
captured correctly. The gross distribution and any tax withholding must be recorded 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 before entering the Deposit. Do not try to edit the receiving end of the transfer.
Here is a "cheat sheet":
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."
In the taxable receiving account:

1. Enter a Deposit transaction for the net amount of the RMD as a positive number.
2. Split the category:
   ● Line 1 of the split: Category = the IRA account name in [square brackets] for
   the gross amount as a positive number. This will create a transfer from the
   IRA.
   ● Line 2 of the split: Category = the Fed tax withholding category that you use,
   as a negative number.
   ● Line 3 of the split: Category = the State tax withholding category that you
   use, 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 up this transaction as an Income
   Reminder.
   Delete or do not accept any downloaded brokerage transactions for
   ● The net distribution
   ● The Fed taxes withheld
   ● The State taxes withheld

Harensjm

this makes perfect sense for an IRA distribution. I assume the ”Tax Schedule” entry will put these RMD‘s in the appropriate category for tax and income/expense reports.

however, in two of my accounts, there is a final distribution to close those accounts and transfer the remaining balance to another SEP account. Will those closing transactions be reflected as 1099 IRA taxable distributions when they are not? Or is the fact that the transfers will be to another SEP keep those transfers out of my income/expense reports?

Jim_Harman

If a transfer is entered in a tax deferred account, it should not appear in the Tax reports or Tax Planner. In your case both accounts are tax deferred so you should be OK.

Try it and see

cdennett

Jim_Harman, thanks so much for that cheat sheet. I've been taking a small monthly distribution from my IRA Rollover account. RMD starts in a couple of years. Your method is how I ended up recording the transaction. Thanks for confirming that I've been doing it the right way.

Harensjm

maybe I did something wrong, but after the making the account and tax schedule changes, I see the RMDs in in my tax reports as “income,” but I still do not see them in an of the traditional reports like “income/expense” or “cash flow” or other similar reports that detail compensation or income.

i think this is because no where in these instructions are the RMDs “categorized” as an “income” item. Or have I missed a step somewhere?

Jim_Harman

Strictly speaking, RMDs are not income, they are transfers from one account to another.

But if you want to treat the RMDs as income for reporting purposes, you can customize the Income and Expense by Category report so that it includes the "spending" account that receives the RMDs but does not include the tax deferred IRA or SEP account. Then the tax deferred account will be listed in the Income section of the report as FROM <account-name>.

If you are using the Banking > Cash flow report, again you should include the receiving account but not the tax deferred account, and on the Advanced tab next to Transfers, select "Exclude internal". The terminology is confusing, but "Exclude Internal" tells it to ignore transfers between accounts that are selected for the report (such as payments from your checking account to a credit card account) but to include transfers between the selected accounts and other accounts.

Other reports have different default settings, but they work the same way: Include the "spending" account but not the IRA and on the Advanced tab, set Transfers to "Exclude internal"