I'm using Quicken Premier 2007 for Windows. I have been moving my 401k and Traditional IRA money into a new Traditional IRA account managed by a financial planner. When I transfer the funds to this new IRA account Quicken asks if it's a distribution, and then what tax year the contribution applies to. The way I see it, it's neither of these. I suspect the basis behind these questions if for tax planning purposes in Quicken. Is this true? Wouldn't this affect the tax plan because Quicken is making incorrect assumptions for why and how these funds are being taken out or put into IRA accounts?
What is the appropriate way to handle this situation in Quicken?
You DID make the transfer DIRECTLY from Trustee to Trustee, didn't you?
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222 16357 body Hi, Scott.
You DID make the transfer DIRECTLY from Trustee to Trustee, didn't you? Getting the assets into your own hands, even for an instant, is a BIG no-no! And your financial planner certainly should know this rule.
I've been retired for over a decade and I've never used the retirement accounts in Quicken, so you'd better check this with your own CPA.
Whoa RC, I have been retired for two years now and all of my and my spouse (also retired) Vanguard retirement accounts are in Quicken. These include ROTH IRA and traditional (and rollover IRA's with brokerage accounts). Before they were Vanguard accounts they were 401K accounts (with our last employers) with Fidelity which we rolled directly to Vanguard after we were retired.
Why don't you track your retirement accounts in Quicken? Quicken provides a very convenient way to keep track of these accounts on a daily basis.
BTW, I look forward to your replies to various problems that users have with Quicken along with your general accounting knowledge.
Because I don't have any retirement accounts. At least, none that are typically referred to by that phrase. I've never had a Keogh or an IRA or any other such account. That's because of a combination of my personal investment philosophy - and timing. At about the time my CPA partnership was ready to consider such a plan for our employees and partners in the late
1970's, I retired from the partnership. My later individual proprietorship took a while to become profitable, so I was not eligible to start a plan. (You gotta have net income; losses don't qualify.) And soon my income was all from investments, not earnings, so such a plan was not available. Remember that many of the current provisions (like Roth) were not available in those olden days.
As to philosophy, I don't care to start a long thread about it. Suffice it to say that I never liked the idea of putting myself into a position where the government might tax me for using my own savings, and even to penalize me for using my money too soon or too little at a time. My philosophy was to pay my taxes on my earnings so that whatever is left over is mine to keep and to invest as I see fit, not as some Congressman thinks I should. And I don't need permission from Congress or the IRS or anybody else to spend my savings when and as I choose.
I know that I'm in the minority on this topic. Your mileage may vary. ;^}
Sorry for the delay in responding. The 2007 Microsoft MVP Global Summit was last week (3/12-3/16) in Seattle and Redmond. We learned a lot about Windows, Vista, etc. - but nothing about IRAs or Quicken. ;^}
See below...
It's something that Quicken has NO control over. You make the transfer and then tell Quicken how you did it. The tax rules (I'm 90% sure that this rule has not changed) say that if YOU get your hands on the assets of the IRA, then it is taxable to you immediately, even if you turn all the assets over to the new trustee on the same day. The only way to avoid immediate taxation - and penalties - is to have the old Trustee deliver the assets (cash, stock, whatever) to the new Trustee directly.
This Trustee-to-Trustee warning is probably in BIG LETTERS on page 1 of the Financial Planner's Handbook. If she doesn't know this rule, then you need a new CPA.
My comments on this are based on your statements in your first message: "When I transfer the funds to this new IRA account Quicken asks if it's a distribution..." This sounds as though you received the funds and delivered them to the new Trustee. If that is not true, then my warning and my whole train of thought may not apply at all.
Could you please restate your original question? Please include such details as HOW the funds went from the old Trustee to the new Trustee. And we are not talking about who MANAGES the funds, but who actually holds the legal title for your benefit: the Trustee. Usually (but not always) this is a bank or other financial institution. The Trustee follows instructions from you or your planner or other agent. What license or other professional qualification does your planner hold?
I believe that Quicken has a problem handling certain retirement account (tax deferred account) transactions.
For one or two Quicken versions at least, there's a straight forward bug ... with consequences that are difficult to determine. Those are instances when Quicken is intending to determine the tax year of a contribution ... but only allows the user to enter tax years that are clearly incorrect. (I do not know exactly what Quicken does with the the "tax year" for contributions.) [A workaround is to enter the "transfer" in the FROM account, where Quicken does offer the correct tax year options.]
A more general problem is that Quicken (at least up through Q2006, I think, and probably Q2007), does not have any ability to grasp that a "deposit" of cash to a retirement account can be anything other than a "contribution". Quicken does not have the ability to treat a Quicken "transfer" of cash from one "retirement" account to another "retirement" account as anything other than a "contribution" in the TO account (and I think, a retirement withdrawal in the FROM account - because deposits and withdrawals to Quicken tax deferred accounts are controlled by the "tax attributes" for that account).
[For clarification: if one is selling assets in one traditional IRA account and transferring the cash to another traditional IRA account to buy assets in the new IRA account ... Quicken thinks the transfer is a "contribution" in the TO account - and I suspect a taxable retirement withdrawal in the FROM account.]
The "contribution" side shows up clearly when you do the transfer, but it's not clear to me how Quicken treats those transfers later. I don't use Turbo Tax, which is one place the results could cause a problem.
I have not tested it, but I suspect that Quicken tax reports could be customized to exclude the above type transactions assuming Quicken listed them incorrectly, but it would certainly be simpler and less anxiety producing if Quicken had the ability to deal with the transactions correctly at the time they occurred.
Thanks for the reply, I didn't think of the obvious answer.
As to your philosophy, I am sure you are not the only one that feels this way. But I can say without reservations that having access to a 401K plan made it a much easier, and painless way to save for retirement. Without the 401K plan I would not have been able to retire at 61.
In any case I have been monitoring this newsgroup for awhile now and I always look forward to the replies to the questions that you and other regulars post. Don't stop. Marty
Thanks for jumping in. As you can see and as I readily admit, I'm way over my head when discussing retirement plans in Quicken.
I replied to Scott originally only to caution him to watch out for the apparent Trustee-to-Scott-to-Trustee transfers that his first post seemed to indicate.
Of course, the IRS really doesn't care how you handle this in Quicken. But they DO CARE how you handle it on your tax return, whether you use TurboTax or a pencil to prepare your return. Quicken SHOULD transfer the info correctly to TT, but it might not. It's up to YOU the taxpayer, not Intuit, to make sure that the tax return is correct.
It is something Quicken has control over. I'm talking strictly about Quicken and nothing more. So it is definitely something Quicken has control over. I had a 401k, now I have an IRA. The funds from that 401k are now in that IRA. As the diligent uber Quicken geek that I am, I want to capture the nature of this transaction in my Quicken data set. Prior to entering this, I had a crapload of money in a 401k account which I had recorded in Quicken. Today, I have a crap load of money in an IRA account. Those funds in that IRA account are not a contribution, they are a rollover. Quicken is asking me what tax year I made the contribution. The problem is, I never contributed those funds to that IRA account.
She's completely fine with her understanding of 401k to IRA rollovers. What she can't help me with is why Quicken on my computer wants to treat it as a contribution instead of a rollover.
You're absolutely right. The IRS doesn't care how I handle this in Quicken, but I care greatly to know the state of my finances. This is what I use Quicken for. I can only assume that all Quicken users use Quicken to capture the state of their finances. When things happen in the real world regarding my finances, I like to capture them in Quicken. All of my questions in this thread are about Quicken. None of them are about IRS rules, law, my CPA's education, or the means of how the funds got from one account to another. My questions are 100% about Quicken, and nothing more.
So.. coming back to the beginning. When I transfer funds from my 401k to my IRA *IN QUICKEN* the Quicken software asks what year I am making this contribution to my IRA account. The problem is, it isn't a contribution. How do I handle this properly *IN QUICKEN*. I hope you don't feel I'm being rude, but you're completely missing the question I'm asking. My CPA is qualified. I know the law. The IRS doesn't care how I use Quicken, but I do care how Quicken captures my financial state and my questions are wholly about Quicken.
I'm sorry if I made this question more complicated than it should have been. I should have assumed that your plan assets were properly transferred directly from the old plan to the new one. But when your first post said you were moving your money to a new account, it triggered my "alert response" and I reacted with the standard caution to be sure you didn't handle the funds personally, even for a moment. That would have caused more complications, probably including penalties.
I was not even thinking of how to handle it in Quicken, and I should have made that clear. On that point, I'll gladly defer to John Pollard.
If you transferred 100% of your 401K to an IRA (which I have done), I just renamed the Account and adjusted the securities (buys and sells) as it was a cash transfer). I entered a comment on the Account that it was my 401K, (plus all of the historical statements would indicated that).
That's not a bad idea. It defeats the apparante program flaw in Q07. Of course, that's not how it happened, but do I care? Hmm.. are there downsides to using your creative (and lazy :-) ) shortcut?
I'm curious though, what are the tax planning implications of Quicken treating my transfer of funds incorrectly?
There definitely is something wrong with how Quicken is handling this. I just noticed that when I go to the Performance tab for all of my investment accounts the graph's total value is exactly double the real value. I suspect it's related to Quicken treating my rollover as a contribution. The old account values are $0.00, so I don't completely understand how Quicken can show the net value of all investment accounts as double what they really are in the Growth of $10,000 graph. Any thoughts?
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