401K distributions not showing as income

Marc
Marc Member ✭✭
edited February 9 in Investing (Mac)
Every month I have a $5000 distribution from my 401K with taxes already taken out. What is the best way to enter this so it shows total income as $5,000 but $4,250 transfer to checking and $750 to federal taxes. I have the 401K account type set as 401K but when I do a transfer it does not show as income.

Best Answers

  • RickO
    RickO SuperUser, Mac Beta Beta
    Answer ✓
    Set up as a split transaction in the Checking account, not in the 401k account. This really is not income since it's a transfer of assets you already have. In other words, the money isn't coming in to you from the outside world. It's moving within your world from one account to another. Therefore, it should be shown as a Transfer as follows:



    If you really want to show it in an income category, the workaround would be to use both a category and a transfer as follows:



    However, this is not in keeping with standard accounting practices and QMac is eventually going to change so that using a category together with a transfer will not be allowed. 

    If you show it as a transfer only, as in the first example, you will still be able to do any reporting necessary by selecting the appropriate account(s), Payee(s) and Transfer options in the reports setup.
    Quicken Mac Subscription; Quicken Mac user since the early 90s
  • Marc
    Marc Member ✭✭
    Answer ✓
    Thanks you for the suggestions

Answers

  • RickO
    RickO SuperUser, Mac Beta Beta
    Answer ✓
    Set up as a split transaction in the Checking account, not in the 401k account. This really is not income since it's a transfer of assets you already have. In other words, the money isn't coming in to you from the outside world. It's moving within your world from one account to another. Therefore, it should be shown as a Transfer as follows:



    If you really want to show it in an income category, the workaround would be to use both a category and a transfer as follows:



    However, this is not in keeping with standard accounting practices and QMac is eventually going to change so that using a category together with a transfer will not be allowed. 

    If you show it as a transfer only, as in the first example, you will still be able to do any reporting necessary by selecting the appropriate account(s), Payee(s) and Transfer options in the reports setup.
    Quicken Mac Subscription; Quicken Mac user since the early 90s
  • Marc
    Marc Member ✭✭
    Answer ✓
    Thanks you for the suggestions
  • Marc
    Marc Member ✭✭
    So what would be the best way to do this in keeping with standard accounting practices? I will get a tax form (1099R) and some taxes will be pulled from it but the whole amount is taxable. What I have been doing is in the 401K I have a Payment/Deposit with a split transaction $4250 to checking and $750 to Fed taxes. But when I do a report I do not see how much taxable income I have.
  • RickO
    RickO SuperUser, Mac Beta Beta
    You can set it up with the split in the 401k account, but you can't use the (nonstandard) method of using both a category and transfer on the same split line (because you'd only be showing $4,250 as personal income). Here's both options side by side:



    If your goal is to generate a report that shows the 401k distribution income in an Income category combined with all other income shown in that category from different transactions, I don't think you're going to be able to do that. (Maybe somebody else has a clever workaround for that.)

    So here's what I'd recommend: set it up as in my very first screenshot above. Then generate a report as follows:

    Type: Transaction
    Row: Category
    Accounts: 401k account (only)
    Categories, Tags and Payees: All
    Advanced: Include All Transfers

    You'll get a report like this:



    This will give you a total of the transfers out of the 401k to Checking (the gross amounts) and you will know to count this as income. You can save the report so you don't need to set it up each time.

    Again, that's my only suggestion. Maybe somebody else has a better idea.
    Quicken Mac Subscription; Quicken Mac user since the early 90s
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    @Marc This is the same issue as people withdrawing an IRA Required Minimum Distribution. At this time, I believe there's only a "trick" way to get it to work...

    Start exactly as @RickO described above: make the transaction from the checking account, not the retirement account, because Quicken won't show any income in retirement accounts. You'll want to have four split in this transaction. The first two are as shown above: a transfer from the 401k account and a federal income tax expense.



    Create a third split line using the category like Personal Income:Other Pension (which is mapped to tax schedule 1099-R for taxable retirement income), with a value of +5,000. That will create the taxable $5,000 income on the Tax Schedule report. But your splits now don't total up to the $4,250 total of the transaction, so now it's time for the trick: enter a fourth split line for –5,000 and apply the category=Adjustment.

    Adjustment is a special Quicken category which is simply ignored in all income and expense reports. In this case, we're created $5,000 in income out of thin air in the third split line, and the opposite adjustment in the fourth split line makes the splits add up to the transaction total. 

    So now your 401k shows the $5,000 being transferred out, your checking account shows the $5,000 being transferred in, the $750 tax deduction, and there's $5,000 in taxable income.

    Yes, it's a bit of a hack. But until the developers recognize that anyone pulling money out of any IRA or 401k account need a more elegant way to do this, this hack works. (I'm pretty certain no one on the development team is old enough to be dealing with IRA and 401k withdrawals and RMDs yet!) Please take a second to click on this link to add your vote for just such a feature. (In the yellow box, click the little black arrow under the vote counter.) More votes will enable this to be pushed to the developers to be added to their development roadmap. 
    Quicken Mac Subscription • Quicken user since 1993
  • RickO
    RickO SuperUser, Mac Beta Beta
    Nice trick @jacobs. Wish I had thought of it.
    Quicken Mac Subscription; Quicken Mac user since the early 90s
This discussion has been closed.