I would like someone to help me figure out how to handle cash distributions from an IRA accounts. I want to have part of the cash just go to my checking account via EFT, part as a tax payment DIRECCTLY to the IRS and part DIRECTLY to the State for the tax due to them. Each of these decreases the Cash Balance in the IRA account that contains the fund. That all makes sense but how do I get rid of the (negative) Cash Balance in the IRA Account? Just adding some cash to the account will do but where would that cash come from? Also, it does not properly reflect what happened.
The problem is due to the tax payments which were sent directly from Vanguard to the US and the State. I didn't write any checks. It was all done via EFT. So how do I enter that in Quicken? Thanks.
As to the source of the cash: where did Vanguard get the cash?
If there was not already enough cash in the account to make the distribution, Vanguard must have sold some shares of one or more securities to produce the cash; you should record the same transaction(s).
As to the withdrawal of the cash: I believe that you need to "transfer" the gross amount of cash out of the IRA account (to whatever non-IRA account received the funds*) in order to have Quicken correctly account for the IRA withdrawal, tax-wise.
Since some of the withdrawal was used to pay taxes, you probably need to modify the transfer transaction in the non-IRA account (presumably a checking account, or some such). You'd make the non-IRA half of the transfer, a split transaction, with the additional lines reducing the cash amount by the federal and state tax that was paid.
So you might start with a checking account transaction with a category of "[My IRA Account]", for example. Change that to a split transaction; add one line categorized to federal tax, a second line categorized to state tax ... each reducing the original transfer amount. The resulting amount should be the net amount deposited.
[* In some (all?) versions of Quicken, distributions from retirement accounts can't be transfers to Quicken investment accounts ... because Quicken - for some reason - doesn't recognize those transfers correctly for tax purposes. If you have one of those Quicken versions and you you transferred your IRA cash to a non-tax-deferred investment account in the real-world: I believe you'll need to change that single transfer into two transfers: one into a non-tax-deferred non-investment account; the second (on the same date), from the non-tax-deferred non-investment account to the non-tax-deferred investment account. Since the two tranfers will have the same transaction date, the balance of the intermediate account will not be affected. But you can create a Dummy account to use for the purpose (and keep it normally hidden, if you prefer).]
"John Pollard" wrote in news:j0p04d$mu0$ snipped-for-privacy@dont-email.me:
This is how I do it. I'm not making any excuses if I'm not doing it right. I have a TIAA account that is used for this, and every month I make 2 transactions to account for this.
Transaction 1: Withdrawal inside TIAA account into cash (sold X shares @ $1). Listed on TIAA website as "monthly withdrawal". Yield X dollars cash inside the TIAA account.
Transaction 2: In my checking account a split transaction as follows: Transfer to personal checking from TIAA: $ X (the whole of the above "withdrawal", this is a deposit into checking. Transfer to Fed tax: 20% of X (apparently the minimum required for Fed income tax). Transfer to NJ tax: 5% of X (state income tax rate).
It is really simple once you think of how the money flows.
Here is what happened just recently for me. I am using Quicken 2011 home and business.
Logged into Vanguard site and sold $2500 from the MM account. During the process I designated $375 for FED taxes to the IRS and to send $160 to Vermont for state taxes.
The remainder to be EFT'd to my CU checking account, in this case $1965.
Waited a few days and Vanguard transferred the $1965 into the CU checking account (which showed up when I downloaded transactions from the CU) then updated the Quicken IRA account showing a sale of $2500 from the MM account, $375 debit for fed tax, $160 debit for state tax with a final cash balance in the IRA account of $1965.
Now this is where I deviate from what may be the normal accounting process.
To remove the $1965 cash balance I transfer the $1965 using the WithdrwX action (cash transferred out of the account) and designate the the destination account to be the same as the from account thus removing the cash balance from the Quicken IRA account.
I was surprised when I first did this many years ago but it works. I suppose I could have created a dummy account but it seemed redundant.
This may not be a correct accounting practice but since I show the cash as deposited into the checking account by Vanguard and the allocation of $'s for fed and state tax I have a complete accounting of the transaction.
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