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Idea for RMDs

JDBalling

To my knowledge, there is currently no straightforward way to take an RMD from an IRA account and move the funds into a taxable account while separating out federal and state taxes. It can be done but, as far as I know, you need to transfer the gross distribution to the taxable account, then go into said taxable account and modify the transfer to take out the taxes. This seems backward since, if you have the taxes taken out of the distribution, it is typically done by the institution where you have your IRA, not the institution ultimately receiving the RMD.

In the Paycheck Wizard, Quicken already has the ability to take a gross deposit, take out taxes as well as any other deductions, and schedule the frequency and timing of the deposit. The only issue for RMDs is that the Paycheck Wizard assumes that the funds are coming from an external source - that the funds are income. The Wizard wants to add new money into a deposit account. It doesn't just move funds from one account to another. It would seem to me that it would be fairly simple to add an option to the Paycheck Wizard that would allow you to specify the source of the funds as one of your existing IRA accounts. If this option was available, you could then set up your RMDs as Income Reminders just as you do a Paycheck.

Quicken Classic for Windows

Version: R66.28

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Comments

NotACPA

As far as Q is concerned, an RMD is just another withdrawal from a tax-advantaged account, and Q can already handle those.

What Q can't do, and probably will never be able to do, is record a tax transaction in a tax-advantaged account.

Your reference to the Paycheck Wizard is irrelevant, since that doesn't happen in a tax-advantaged account.

AND, you can already set up any memorized RMDs as reminders … if you want to take the same amount each month. Just record them in the taxable account with w/d transfers from the retirement account.

Jim_Harman

For reference, here is the Idea for this feature. It has been in the Planned state for 2 1/2 years.

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

While we are waiting for Quicken to make this easier, here is a detailed set of instructions on how to make this work currently. It looks complicated, but as @NotACPA notes, you can set up a reminder to automate the entry.

It can be tricky to record distributions such as RMDs from a tax deferred account to a taxable account in Quicken so that the tax implications are captured correctly.

One-time setup:

There are no built-in Categories for IRA tax withholding; you must set them up yourself. I use these:

Tax Fed:Fed IRA WH with a tax line item of 1099-R:IRA federal tax withheld
Tax State:State IRA WH with a tax line item of 1099-R:IRA state tax withheld

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 "1099-R:Total IRA taxable distrib." If you don’t see the Tax Schedule button at the bottom of the Account Details dialog, click on View in the top menu and select “Tabs to show”. In the list of tabs, select Planning.

To enter a distribution:

Enter one or more Sold transactions for the securities that were sold. This will put a cash balance in the account equal to the total amount of the distribution, including any taxes that were withheld.

If no taxes are withheld from the distribution, you can simply enter the distribution in the IRA as a transfer to the receiving account.

If taxes are withheld from the distribution, the process is more complicated because you must record the gross distribution as well as the withholding(s) in the receiving account. To do this, go to the receiving account and:

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

2) Split the Category for the deposit:

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.

3) The deposit you entered will create a WithdrawX in the IRA for the gross amount. Delete or do not accept any downloaded transactions in the IRA for the net distribution and the withholding.

Notes:

If the deposit is made to a banking account between Jan. 1 and April 15, you will see a dialog titled “Confirm Your Contribution Tax Year”, even though this is a distribution and not a contribution. Select the current year, not the default of the previous year, and click on OK. This seems to be a bug.

If you receive the distributions regularly, you can save repeated manual entry by setting up this transaction as an Income Reminder in the receiving account.

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

James104

I think this is related. I was looking for a report that would list my RMD withdrawals so I could check where I'm at relative to the annual minimum.

Maybe I’m missing something or making this more complex than needed, but I use the following to create a report of just RMD amounts. There’s probably an easier way.

I looked for a simple report that included just the total amount of RMD withdrawals from our IRAs. All of the Q standard reports included other transactions, partly due to how Q treats the different ways to enter a withdrawal.

I’ve ended up with this work around:

I saved a “transaction report” which includes just our IRA accounts, and just the action “WithdrwX”. Saved with a Date Range “current year” adds an option to select ‘current year’ or prior fiscal years.
I record the gross RMDs in the investment account using “Cash Transferred out of Account”, which shows in the investment account register as a “WithdrwX” action. I transfer/journal the gross before taxes into an account I created named "RMD Allocations"
- “Withdraw”, “Write Check” and “Other Cash Transaction” transactions record in the register as a “withdraw”, which isn’t listed as a selectable action in investment transaction reports. I think these fall under the action "cash", which pulls a lot of other transactions into the report.
In the RMD Allocations account I split the amount transferred to allocate it between tax categories (state/federal) and a transfer to whichever account the net RMD actually went to. The net amount of the transaction in the RMD Allocations account is zero.
I delete the one-step-update broker’s download of the individual transactions which are: with a normal distribution the taxes paid and net journaled to another account; the ‘funds paid’ for a QCD.

Q Win Classic

Jim_Harman

@James104 If you have entered the RMDs as described in my March 19 post above, you should be able to see the information you are looking for in the 1099-R section at the bottom of the report at Reports >Tax > Tax Schedule.

You have not described how you are entering the QCDs, but here is the method I use, and it feeds the Tax Planner and Tax Schedule report correctly:

Set up a special Expense category for QCDs. I called mine Charity-QCD. Give it a Tax line item of "1099-R:Total IRA taxable distrib." This causes the QCD to reduce the taxable portion of the IRA distribution by the amount of the donation.
Sell securities in the IRA if necessary to generate the cash for the QCD.
In a dummy taxable banking account, enter a Deposit transaction for the net amount of the donation, with a split if necessary with the first line a transfer from the IRA for the gross amount of the distribution and the second line any taxes withheld as a negative number. My state (CT) requires state withholding for all IRA distributions unless you file a form telling it not to withhold.
In the dummy account, enter a second transaction for the net amount of the donation, using the Charity-QCD Category. I use a second transaction to give the donation better visibility in the register and reports, and because Quicken tends to get confused if you enter a split transaction for a zero amount.
When the QCD transaction downloads from the FI, accept the matching security sale if any, but delete or do not accept the downloaded cash transaction(s).

With these entries, the Tax Planner, Tax reports, and spending reports all appear to be correct and no manual adjustments are required in the Tax Planner.