New Roth 401K feature not working correctly

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Drinkingbird
Drinkingbird Member ✭✭✭✭

After years of waiting, it is good that they seem to be moving on this feature, however the update today that supposedly added support for it is not working right.

The paycheck line item is there, and it under the "Category/Account" heading it shows [Account]/Roth401KContrib - so seemingly it should be categorizing it under a new "Roth401KContrib" category along with transferring it to the 401K accont. But it is categorizing it as _401Contrib, just like Traditional 401K, thus tax planner and reports are deducting it from income, which obviously should not happen for an after tax item. There is no Roth401KContrib category (tried adding it but it didn't change anything). I would also think it should be a hidden category with _ at the beginning but it is not under hidden ones either.

It is getting the _401Contrib category since it is added to the hidden "Tax Impact of 401(k) Accounts" account which tags all transfers with that category. After tax 401k contributions should not be put into this account.

@Quicken Jasmine please alert the developers to this - if people start using this while it is incorrectly set up they're going to have transactions that need to be fixed, or the next release will need to find and fix those transactions.

Comments

  • Quicken Jasmine
    Quicken Jasmine Moderator mod
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    Hello @Drinkingbird,

    Thank you for reaching out to the Quicken Community, though I do apologize that you are experiencing this issue.

    If you don’t mind, could you please provide a screenshot of the errors you described receiving? If needed, please refer to this Community FAQ for instructions on how to attach a screenshot. Alternatively, you can also drag and drop screenshots to your response if you are not given the option to add attachments. Please remember to redact any personal information as needed.

    I look forward to your response.

    -Quicken Jasmine

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  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    There aren't any errors, it is just categorizing it incorrectly, it is a design/programming issue. It can be replicated easily by entering a paycheck with the new roth 401k contribution then looking at tax planner and tax reports. It is being deducted from taxable income, which obviously an after tax paycheck item should not be. The other relevant info is in my post as well, they should be able to see what is going on based on that. Thanks

  • Quicken Kristina
    Quicken Kristina Moderator mod
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    Thank you for your response,

    I recommend that you contact Quicken Support directly for further assistance as they can walk you through troubleshooting steps in real-time and escalate the situation as needed.  The Quicken Support phone number can be found through this link here. Phone support is available from 5:00 am PT to 5:00 pm PT, Monday through Friday.

    I apologize that I could not be of more assistance!

    Quicken Kristina

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  • mikek753b
    mikek753b Member ✭✭✭✭
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    BTW - I called Premium Tech Support, but didn't get any answers related to this Roth type situation, I was asked to call again.

    Best Regards
  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    What you're asking for is something totally different than what is in this thread.

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    What you're asking for is something totally different from what is being discussed here.

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited May 2023
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    I think it is all related. The Roth 401(k) paycheck deduction feature introduction was half-baked, at best. It is great that this feature was added but it is clearly broken/incomplete requiring workarounds to address some of the issues but there still not being any kind of reasonable workaround for one of the issues.

    • It did not add the ability to create a tax exempt Roth 401(k) account. Must instead create a "tax deferred" (which is really "tax exempt") Roth IRA account and name it "Roth 401(k)" as workaround to get the deduction properly accounted for in Tax Reports and Tax Planner and (hopefully) in Lifetime Planner.
    • It did not add the ability to enter Roth 401(k) employer contributions. Must instead enter them under the 401(k) employer contributions section.
    • It did not add the ability to differentiate pre-tax 401(k) contributions and holdings from after-tax Roth 401(k) contributions and holdings when they are both held in the same retirement account. There does not appear to be any kind of reasonable workaround for this.
    • Did I mention that Quicken still does not differentiate "pre-tax" accounts from "tax exempt" accounts in Account Details, reports and planning tools? So, how do we really know if they are being captured and managed properly? At best, this makes it very confusing and at worst is inaccurate.

    There is another thread on this subject which also talks more about the workaround options, including the workaround option that somewhat addresses the specific issue of this thread:

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
    edited May 2023
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    I added another workaround to your list in that thread, making use of the tag but preventing it from getting categorized as pre-tax. Still does nothing to address many of the other issues. This new feature is essentially useless, other than creating a tag that you can make use of (and triggering me to realize that you can add a tag to a transfer by adding /[Tag] after the account in the category). I think I did actually know this at one point but forgot it as it wasn't something I thought I needed, but it does help in this case. Makes it easy to run a report at the end of the year to see how much was roth and how much was regular (since I contribute both types). Before I just ran a report for anything with memo "employee roth" which worked too since my after tax transaction has those keywords in it. So this makes it slightly easier to run a report to find roth contributions.

    Another option is to use their new "feature" but uncheck the roth tag in tax reports. This only fixes reports though, not tax planner etc. And it still runs the roth contributions through the hidden "tax impact" account and classifies them as pretax, so really don't recommend using their new "feature" at all. It will make things worse, not better. They have done nothing to account for withdrawals and being able to classify them as Roth or Traditional, so that is yet another issue with this "feature".

    They do seem to have added a section to one of the tax planner screens to show how much was tagged as roth, but on the same screen it shows the amount being deducted from taxable income. Anyone using this new feature is going to end up in a big mess, I think they should pull the feature quickly until they figure out the correct way to implement it.

    I made a post in this thread last night with some screen shots and workarounds but I guess it is awaiting approval due to the images.

    At this point, I'm not making use of the new after tax type or even the tag. I'm sticking with my manual generic after tax line item, and report that searches for the memo "Employee Roth" until they get this figured out. Going back and editing previous paychecks often messes up the memos on the transfers in the 401k account, a bug that has been around for years, so no sense in dealing with all that until I see what they plan to do (if anything).

  • mikek753b
    mikek753b Member ✭✭✭✭
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    so far this is a mess, as I have to use other tools and own excel tables

    Best Regards
  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    Support can't help with a product design issue. It isn't that it isn't working just for me, it was implemented wrong and several others have reported the same thing.

    The new Roth 401k paycheck deduction is in the "After Tax" section. But in the tax reports, it is showing as deducted BEFORE tax, due to being transferred through the hidden "tax implication" account. This is causing taxable income to be reported incorrectly (less than it should be), which is a problem for people planning their tax liability for the year or exporting the data to tax software.

    The other issue is that withdrawals from the 401k account are going to be shown as taxable, when Roth withdrawals are tax free. It needs to prompt for which type of withdrawal it is and treat it differently depending on the type.

    I've attached 3 screen shots showing various places where it is deducting this AFTER TAX amount from taxable income. I made a dummy file and put in a $1000 paycheck with $500 roth deduction, and it shows my taxable income as $500, when it should be $1000.

    As a workaround one can exclude the new tag from reports, but that doesn't seem possible on tax planner, and still doesn't address the issue of withdrawals being shown as taxable.

    Other possible workarounds are to not use the new roth deduction, just create another after tax deduction and manually add the tag in the 401k account. That at least lets you run a report to show how much is roth and how much isn't. Again, does not address the withdrawal issue though.

  • Quicken Kristina
    Quicken Kristina Moderator mod
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    Hello All,

    Thank you for taking the time to visit the Community to report this issue, though we apologize that you are experiencing this.

    We have forwarded this issue to the proper channels to have this further investigated. In the meantime, we request that you please navigate to Help > Report a problem and submit a problem report with log files attached in order to contribute to the investigation.

    While you will not receive a response through this submission, these reports will help our teams in further investigating the issue. The more problem reports we receive, the better.

    We apologize for any inconvenience!

    Thank you.

    (CTP-6727)

    Quicken Kristina

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  • Quicken Kathryn
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    Hi @Drinkingbird - I'm digging into this issue for our development team—I've been testing the scenario you've outlined, but I'm not able to reproduce what you're seeing in terms of the Roth 401(k) contribution showing as pre-tax income—would you be able to post a screenshot (or send it to me via direct message) of the full paycheck wizard, along with a full screenshot of the mini-report in the register of a paycheck reminder that has been added to the register (i.e. the current or a past date)?

    Here is what I'm seeing for reference:

    I use the paycheck wizard to create a reminder, with a 401(k) and Roth 401(k) entries:

    When I enter this reminder into the register, it shows correctly in the mini-report and on the tax center; the 401(k) amount is deducted from the taxable income, and the Roth 401(k) isn't:

    When I edit the paycheck reminder to remove the 401(k) contribution entirely, then add this paycheck to the register, I'm still seeing it correctly in the mini-report and tax center:

    The 401(k) contribution shows still as $-100 to taxable income, while another $150 Roth 401(k) entry shows the total of $300.

    In this case, the Roth 401(k) entry in the paycheck wizard tracks the category as a transfer to an account with a tag of Roth 401(k), which is what it was designed to do, as in terms of taxes, it's treated as taxable income, which, in the Tax Summary report, would be included in your gross paycheck amount.

    You can see here in the mini-report, the 401(k) and Roth 401(k) total amounts tracking as transfers:

    Please let me know if I've missed a step or if I'm seeing something different than what you experienced—any more info you can provide would be great!

    Thanks—

    Quicken Kathryn
    Community Administrator
  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
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    Make sure the employee after-tax Roth 401(k) contributions are transferred into a Roth IRA account (give it a Roth 401(k) name), not into a regular 401(k) account.

    Also, make sure the employer Roth 401(k) contributions are entered as pre-tax 401(k) employer contributions and that they are transferred into that same Roth IRA account.

    Doing it this way will prevent Quicken from capturing the contributions as before tax transactions and the distributions as being taxable.

    If you instead transfer the contributions into a regular 401(k) account Quicken will capture the Roth contributions as pre-tax and the Roth distributions as income.

    Of course, this will only work if your keep your regular 401(k) and Roth 401(k) accounts in separate accounts. Quicken currently has no way to differentiate regular 401(k) from Roth 401(k) that are held in a common account and there is no good workaround for this at this time.

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    I started with a brand new file, set up a couple dummy accounts and a dummy paycheck. With $0 traditional contribution, and $100 roth, it was showing $100 as _401Contrib. Maybe the $0 traditional contribution (in order to register the traditional employer match) has something to do with it. But the roth contribution was definitely being sent to the "tax implications" hidden account and counted as pre-tax. I will have to try a few scenarios in a new dummy file to see. But if you create a new file and do what I did you should see the same as my screenshots.

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    In my case I'm transferring into a traditional 401k account, not roth IRA, and still have the problem.

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
    edited May 2023
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    OK, it is related to having $0 for traditional contribution, so it actually seems related to previous issues with having $0 for traditional, which has been an on and off issue for a while now. It seems to really confuse Quicken when there is $0 for employee pre-tax.

    If I enter a check with
    $125 Traditional Employee Contribution
    $150 Employer Match (which is traditional)
    $200 Roth

    $125 is transferred via the hidden Tax Implications account and counted as _401Contrib, which is correct. Reports and tax planner look correct.

    If I enter a check with
    $0 Traditional Employee Contribution
    $150 Employer match (traditional)
    $200 Roth

    Then $200 is transferred via the hidden Tax Implications account and counted as _401Contrib, which is wrong.

    In my case, I only contribute Roth, not traditional, however the employer match is traditional, so scenario 2 applies (and applies to many others as well).

    And in playing around with it, the first roth after I edited the transaction is now being counted twice so tax planner is showing $600 instead of $400 for Roth too. I think this all goes back to the inability of Quicken to understand not having an employee pre-tax transfer. With Roth 401K, there needs to be the ability to have the employee contribution be after tax (roth) and the employer match to be pre-tax (traditional). That's how most Roth 401Ks work (recently they've started allowing employer contribution to be after tax but that is not yet common, though it is something Quicken is going to need to account for soon).

    In reality, there should be an employer match for traditional, and a totally different employer match for Roth.

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
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    That was my point. Using a traditional 401(k) account for a Roth 401(k) will not work correctly with the Tax Planner and Tax Reports. At this time the best workaround option appears to be using a Roth IRA account for the Roth 401(k).

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
    edited May 2023
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    Problem is that doesn't work if you have both traditional and Roth in the same account. It does appear that this feature works with traditional 401K account but ONLY if you make a traditional contribution along with the roth contribution. So if they fix that bug, we may be onto something.

    Of course there is still the matter of withdrawals etc. One step at a time.

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited May 2023
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    Problem is that doesn't work if you have both traditional and Roth in the same account. It does appear that this feature works with traditional 401K account but ONLY if you make a traditional contribution along with the roth contribution. So if they fix that bug, we may be onto something.

    Thanks for confirming what was posted here back on 5/7. It was also stated then that perhaps this is the biggest issue with this Roth 401(k) issue since there is no reasonable workaround for it (at least none identified to date that I've seen). Most of the other issues have at least a manageable workaround.

    A summary of the Roth 401(k) issues from my perspective:

    • There is no Add Account option to create a Roth 401(k) account.
    • There is no option under the after-tax deduction section to enter employer Roth 401(k) contributions.
    • There is no option in 401(k) accounts to hold and differentiate between 401(k) and Roth 401(k) contributions/holdings/distributions creating significant issues with Tax Reports and Tax Planner.

    There also needs to be an improvement to clearly differentiate tax deferred accounts from tax exempt accounts instead of lumping them all under "tax deferred". A big "Thank you!" to @mikek753b for posting this as a Product Idea….we need more people to vote for it so anyone who has not yet voted, please do so.

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • Quicken Kathryn
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    @Drinkingbird @Boatnmaniac - thank you for the additional discussion! Oddly enough, I was able to reproduce this in a new file, but not my existing file, but I'm now seeing the issue—we are digging in and will let you know if we need more information.

    We'll also be following up on the request for employer match for the Roth 401k—

    Thanks!

    Quicken Kathryn
    Community Administrator
  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
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    I can't tell if that is sarcasm/snark or not. No previous post has mentioned that it works correctly if you have both traditional and roth contributions but not if you only have a roth, that's a new discovery. There is a a workaround at least for tracking the contribution type (create your own after tax deduction and make use of their tag), which I also posted, but certainly not ideal. But there are plenty of open issues with this feature. I have no issue having an account simply considered a 401K as long as it is able to differentiate the contributions and holdings. In fact for many that get both types of contributions to the same account, that is required.

    As long as transfers in and out get classified correctly, that's a big step forward (if we can get to that point). I don't necessarily care which portions of which investments are counted toward each type (I do make use of the "cash source" tag on purchases and sales in hopes that someday it gets used). But any 401K or IRA is going to maintain those stats for you so when you sell and transfer out, you just need to be able to tell quicken what type that cash is.

    Just being able to see the correct amounts on tax reports and planner would be a big step forward at this point.

  • Drinkingbird
    Drinkingbird Member ✭✭✭✭
    edited May 2023
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    For me it happens in both a new file and my normal/existing file. But as we've discovered, in both cases for me it is only when the traditional contribution is $0 (in order to get the employer match field to work). There have always been bugs with doing this but for a couple years it finally worked consistently, transferring $0, plus employer match, plus after tax, as 3 transactions to the 401K. Now the $0 amount does not get transferred (which is actually fine, less clutter), it gets assigned to the checking account now in order to prevent it from showing as uncategorized. But that seems to have messed something up again. Honestly the paycheck wizard has never "liked" more than 1 transfer to the same account, I saw this with ESPP transactions when I had one of those too.

    At this point I've changed nothing, my previous workaround of just making my own after tax deduction and calling it "ROTH" is what I'm using until this gets sorted out. At least then I can run a report searching for memo to see my total for the year.

    It looks as though the $0 transaction is telling quicken that it needs to run a transfer through the "tax implications" hidden account but because the traditional is $0, it is putting the roth there instead.

    Worth noting for your design team, there are several possible combinations these days:

    Employee Traditional Contribution + Employer Traditional Match
    Employee Roth Contribution + Employer Traditional Match (until recently employer match had to be pre-tax)
    Employee Roth Contribution + Employer Roth Match (a fairly recent thing that not many support yet)
    Employee Traditional + Employee Roth + Employer Traditional (for those that contribute to both)
    Employee Traditional + Employee Roth + Employer Traditional + Employer Roth (again not that common yet).

    And of course there are just plain after tax contributions to 401K/IRA but I don't think that is an issue (other than when combined with one of the above and confusing Quicken potentially).

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
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    No sarcasm or snarkiness from my side was intended.

    I think you've misread what I'd posted. Your first paragraph does not reflect what I have stated in this (or any other) thread. I'm not sure how you came to that conclusion. What I have said is that the current 401(k) account does not properly accommodate both traditional and Roth contributions, holdings and distributions and that this is a big issue. In fact, it does not properly accommodate Roth 401(k) at all.

    Because the current 401(k) account does not properly accommodate Roth 401(k) at all, I did suggest that an Add Account option for a Roth 401(k) account is needed. If, instead, Quicken can add some sort of Roth option to the current 401(k) account, I would be OK with that, too. Whatever the Roth solution ends up being, until it is fixed, for those who have Roth 401(k) holdings that are kept separate from traditional 401(k) holdings, a current workaround solution is to set it up as a Roth IRA account. Doing so will capture the data correctly in Tax Reports and Tax Planner as after-tax contributions and distributions will be tax-free.

    I think we can both agree that there are some pretty big holes that need to be filled when it comes to how Quicken manages the 401(k)/Roth 401(k) scheme.

    Quicken Classic Premier (US) Subscription: R57.16 on Windows 11

  • mikek753b
    mikek753b Member ✭✭✭✭
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    the only way it isn't impacting my 401k before tax is when I have extra ADDITIONAL Roth IRA account that is selected for After Tax Roth 401k contributions.

    pls. don't confuse it with Roth 401k works for me, as it doesn't

    this is the WORKAROUND to have Roth 401k contributions on top of Traditional before tax 401k contributions, yes I have both in my 401k

    as way before I asked Quicken to start supporting Fidelity 401k Sources to address this issue, where each Source to be set with appropriate Tax meaning. But, … so far nothing to say …

    Should we post another Idea to start supporting 401k Sources?

    BTW - I have 5 Sources in my 401k

    Best Regards
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