Am I recording Qualified Charitable Distribution (QCD) correctly?

bobi
bobi Quicken Windows Subscription Member ✭✭
in Business and Rental Property Tools (Windows)

I have Quicken Classic Business & Personal (R66-18). How do I record a Qualified Charitable Distribution in which I write a check directly to a charity from my Schwab IRA account? Like Federal, California also excludes QCDs from taxable income. How do I record a QCD so it is correctly reported on the Tax Summary Report & the Tax Schedule Report? I do know I have to make sure the accounts are selected for each report and to include all transfers.

My Schwab IRA account is set to:

Transfer In

Form 1040: IRA Contribution Spouse

Transfers Out

1099-R: Total Taxable Distrib

I have created IRA Expense Subcategories:

IRA

Tax-related: No

IRA: IRA Contrib

Tax-related: Yes

Form 1040: IRA Contribution

IRA: IRA Contrib Spouse

Tax-related: Yes

Form 1040: IRA Contribution Spouse

IRA: QCD

Tax-related: Yes

1099-R: Total Taxable Distrib

As per Google, I have also created a "dummy" checking account (don't know if I need this).

To record the QCD transaction to "net out" to zero taxable income:

  • In my IRA Checking account, enter a Deposit for $0.00
  • Split Line1: Category: [Schwab IRA] (to transfer). Amount: +$2,250.00
  • Split Line 2 Category: IRA:QCD. Amount: -$2,250.00
  • For the Tax Schedule Report: I see a $2,250 positive and a $2,250 negative under the 1099-R section, netting to $0.00.
  • For the Tax Summary Report: the $2,250 IRA:QCD category shows just as a negative expense. This does NOT net out to $0.00 on this report.
  • QUESTIONS:
  1. Am I on the right track in setting everything up?
  2. Should my "dummy" checking account be Tax Deferred or not? Do I have to assign Tax Lines for Transfers In and Transfers Out?
  3. What tax line to assign the subcategory IRA: QCD? 1099-R Taxable distrib or 1099-R Gross distrib?
  4. Is the Tax Summary report correct?
  5. How do I record a QCD so it is correctly reported on the Tax Summary Report & the Tax Schedule Report? Would love a step-by-step guide.

Would love any help and insight on entering QCDs and would love a step-by-step guide if anyone has figured this out. Thanks much.

Answers

  • Jim_Harman
    Jim_Harman Quicken Windows Subscription SuperUser ✭✭✭✭✭
    1. It sounds like you are on the right track. I handle the transactions in the dummy account slightly differently, with two transactions rather than a split. This is because Quicken sometimes gets confused about whether a transaction that nets to zero is a deposit or a withdrawal.
    2. The dummy account should not be tax deferred.
    3. Taxable is correct

    Here are the steps that work for me:

    1. 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.
    2. Sell securities in the IRA if necessary to generate the cash for the QCD.
    3. 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.
    4. 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.
    5. When the QCD transaction downloads from the FI, accept the matching security sale 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.

    QWin Premier subscription
  • bobi
    bobi Quicken Windows Subscription Member ✭✭

    Thank you! Just by entering two transactions rather than a split transaction, my Tax Summary report is now correctly showing a net zero for the QCD.

  • NotACPA
    NotACPA Quicken Windows Subscription SuperUser ✭✭✭✭✭

    @bobi In the Tax Summary Report, are you subtotaling by Category, or Tax Schedule?

    When I ran the report by Tax Schedule, the offset showed, but not when I ran it by Category.

    Which, oddly, makes sense in Q, because the Income & Expenses for Retirement accounts don't show on "Categorized" reports unless specifically included

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

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