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Tax Planner - Missing Withholdings For Federal Tax On IRA Withdrawals

Tony Fong

Hi. I am using the category Tax:Fed for my federal tax withholdings. In Tax Planner under Withholdings, it's pulling up all of the withholdings from my paycheck in my Ally Checking account. I have also taken some pre-tax IRA distributions from my Fidelity account. Those transactions show up as Withdrawals and I have categorized them using Tax:Fed. Those are not showing up in Tax Planner. Can someone tell me why and what I need to do to have these withholdings get picked up in Tax Planner? Thanks.

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NotACPA

ALL tax transactions must be recorded in a Q account that's taxable. If you're recording those tax w/h in the IRA, that's why they aren't showing.

What you need to do is record the w/d as a transfer for the full amount to a taxable account and then split that transaction. The 1st line of the split will be the full amount as a positive number and the 2nd line is the taxes w/h as a negative number. Then click ADJUST to get the "Transaction Total" which is the amount actually deposited to your account.

Jim_Harman

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.

Tony Fong

Thanks Jim and NotACPA for your recommendations! I understand what both of you are recommending. I will try both methods with the next distribution which should be happening in the next few weeks. Seems like one of the methods will work for me!