SS & Pension Check Setup

Hi, Jaygreg.

I've never used Quicken H&B and I don't get a pension. But I've been drawing Social Security benefits for about 10 years. And I practiced public accounting for 30 years before retiring about 20 years ago. Some things have changed since then, such as IRS form numbers and many of the rules, but the general pattern remains the same.

Neither SS benefits nor pensions should be on a W-2. The W-2 form is only for reporting "compensation" for services rendered - what we usually call salaries, wages, commissions, and such. In addition to reporting the worker's income, the W-2 also reports income taxes and FICA taxes withheld (plus state taxes when appropriate). I'm sure you've noticed that W-2 income goes onto Line 7 of Form 1040, but pensions go onto Line 16 and Social Security onto line 20. (Both pensions and SS may need to be entered first onto a schedule to determine how much is taxable.)

Pension payments are reported by the payer on Form 1099-R or a similar form. Social Security benefits are reported on SSA-1099. If income tax is withheld from the pension, this is shown on the form, too.

As you've probably noticed, SS checks arrive on a different day each month, based on the day-of-the-month of your birthday. Since I was born on the

10th, my check arrives (via direct deposit) on the second Wednesday of each month; that was March 10 this year and will be April 14. My wife's benefits are based on my account, so her check arrives on the same day. If you have Medicare Part B and/or Part D, the premium is deducted from your check. Many retirees also have income tax withheld from their benefit checks.

Set up a Scheduled Transaction in Quicken, scheduled for "Monthly" on "The _Second_ _Wednesday_ of every month" (for example), with "No end date". It's a Split transaction; the gross amount is Social Security Income and the Part B premium is a deduction, and the net amount is a deposit to your checking account. In your Categories list, edit the benefits Tax Line Item to "Form 1040LSocial Security Income, self". Make sure the Part B deduction goes to "Medical:Insurance:Medicare Part B", NOT to Medicare Tax, and to "Schedule A:Doctors, dentists hospitals". During your working years, you paid the tax, which bought you the Part A (hospitalization) coverage; what you are (optionally) paying now is a premium for insurance for doctors and other medical expenses. The tax was not deductible; the medical insurance premium is - at least, it might be, depending on the facts and arithmetic on your itemized deductions schedule.

The details will be different for your other pension(s), but the general pattern should be similar. IF you have income taxes withheld from your pension, be sure to code it as a Transfer to an account such as [FIT Withheld], not to an expense, so that it will accumulate during the year and show as a credit for Tax Withheld on your Form 1040.

Be sure to check with your own CPA to be sure that the rules haven't changed too much since I retired, and to see if there are quirks in your own situation that I don't know about.

RC

Use scheduled bill or deposit instead of paycheck.

My ?Tax Schedule-2009? report is generating a ?W2? section showing amounts only in the tax sections. 2009 was my first full year receiving pensions and SS checks so I?m still tweaking the process. I seem to have set up both of these at some point as recurring ?paycheck? entries but then changed the pension to a recurring split transaction (rather than use the form) along the way. Result is, the SS transactions are generating W2 tax entries. Everything seems to eventually flow to the proper 1099R and 1040 form sections ? but I?m left with pretty messy tax schedules and summaries.

What?s the cleanest way to enter recurring pension and social security checks? It appears using the ?Set up paycheck? routine generates W2 related stuff I just waste ink printing.