Old Question - Disconnect between tax status of account and its transactions

John Dozier

I've asked this question in the past, and as I recall the answer was something like "well, that's just the way it is" or "why does it matter" or something to that effect.

Let's just take a simple example. I use some of the canned reports and also some reports I have created to calculate income for tax purposes. To simplify this, let's say I have just one account, an Rollover IRA, and it is identified in the Account Details as Tax deferred. Under Tax Schedule Information, Transfers from this account are shown as "1099-R: Total IRA Taxable Distribution".

For practical reasons, I would want to show the distributions as income, but I don't want the interest or dividend income for that account's holdings to show as current income. Those interest and dividend income transactions aren't taxable until they become part of a distribution. But all the reports, regardless of canned or custom, show them as income because of their categorization as IntInc or DivInc. It doesn't matter if the account is tax-deferred or not. There are other categories that could be used, like DivIncTaxFree or IntIncTaxFree, but I suppose they are used for other purposes, and anyway, the user interface for entering transactions for the Investment type accounts don't tag them that way.

I see no way to separate out those transactions so that they don't get shown in the report as current income. Of course, I could just take all the IRA accounts out of the reports and handle them separately, but why?

The only other strange thing is that two of my IRAs show as Traditional IRA account type and the other one is just IRA, but not traditional. But in the drop-down list, "IRA" is no longer an option. Just Traditional, Roth, Keogh, SEP or Simple IRA.

q_lurker

In creating any taxable income/expense report, you should EXCLUDE IRA accounts. The transfer from the IRA account gets treated as taxable income as it is received into a taxable account that is included in the report, based on the tax-line assignment you cited.

I can’t comment on the question about various IRA types, at this time.

John Dozier

If one excludes the IRA accounts, how does one account for the income generated by the distribution from that account?

Strangely enough, when I exclude the IRA accounts, in a custom report I have created, two of the three distributions still show up in the Transfers section (which is a good thing), but one does not. The strange thing is that when I look at the transactions split for all of them, they all look the same. So there must be some difference in how the origin account is coded.

And, in a slightly different matter, my taxable brokerage accounts aren't handled the same way either. Two of the three have interest/dividend transactions showing up as interest, but the third one doesn't. The transactions are all coded the same way and the accounts all seem to be coded the same way.

q_lurker

If one excludes the IRA accounts, how does one account for the income generated by the distribution from that account?

The distribution must be a transfer from that IRA account to a taxable account. The 'income' is thus recorded in the taxable account. The tax line for that income (transfer in transaction) is set using the Tax Schedule fields of the IRA.

I am not seeing a functional difference between accounts typed as IRA vs Traditional IRA. In my case, the type IRA accounts were created when I first started with Quicken, circa 1990. My only account typed as Traditional IRA was created in 2017. In my case, I am seeing transfers out from either type treated the same.

Perhaps a File / Validate and Repair selection would clear the issue for you. No need to Rebuild lots or correct price history data. Beyond that suggestion, I'd need to see the Account Details, transaction details, and report settings to offer anything else. If you are not seeing any differences, it is unlikely I would either.