Tracking CDs, Interest and Maturation in QP2007

Duh, guess I should have poked around in Quicken Help a bit more. I see that I've used the wrong account type, and CD management is quite simple. All fixed.

Thanks and Regards,

Margaret

Margaret wrote:

Hi, Margaret.

Please post back in a month or two and tell us how Quicken's CD management is working out for you.

Several of us here have been investing in CDs for decades and have complained often about the difficulties in tracking them in Quicken. Perhaps there are some new features that I have not yet explored.

The problem has not been recording the initial purchase of the CD, at least since they added the CD classification and we no longer have to treat it as a stock (10,000 shares of CD at $1 per share) and then add compounded interest as Reinvested in additional shares. :>( And we've not been able to schedule regularly monthly or quarterly interest transactions without some clumsy workarounds, because Quicken won't schedule Investment Transactions. And, at maturity, we had to record the Sale of the CD - and Quicken recorded our zero capital gain.

So, if you are happy with the new system after using it for a while, please post back and clue us in.

RC

Hi RC,

I will definitely post back and let you know. My current CD matures on

05/07/2007, so that will yield a bit more info. I'll be interested to see what Quicken uses the mature date for, or if it's just a place to record that info (in the security details for the CD, that is). I've now recorded the monthly interest as "Interest," so it's gets categorized as "_IntInc," but I'm a bit disappointed that Quicken doesn't somehow use the mature date to apply interest to the year of maturity and not to each year that I own the CD.

I use TaxAct, so I can play with different reports, but for TurboTax importers, interest would be incorrect for all years, since Q applies it to the year posted. Do you have any workaround for this? I've been mulling over using "Miscellaneous" and either making a new category or using a class to make reporting simpler, but I can just do a security report for the CD. This still leaves my tax reports incorrect, however. The CD doesn't pay that much more than my savings account, so it was really an exercise in learning how CDs work. Not sure if I'm going to renew or close the CD yet, but if it's extra work in Qicken, I may just close it.

Anyway, I'd be interested in any thoughts and/or workarounds on the above.

Thx and Regards,

Margaret

R. C. White wrote:

Hi Margaret:

Interest on a CD is taxable in the year it is paid just like any other bank deposit account. You should have received a 1099INT from the bank for interest paid and thus taxable in 2006. Quicken is correct in the way it is handling the interest.

Jim...

Hi, Margaret.

My complaint is with Quicken's clumsy way of dealing with CDs and the interest income from them. And that's not a reason to avoid CDs.

I don't mean to denigrate CDs in any way. They serve a very good purpose. My wife and I have owned them for decades.

As for assigning interest income to the proper year, that is dictated by Congress and the IRS and their rules about Original Issue Discount (OID). Once upon a time, compounded interest was not taxed until maturity, when the taxpayer actually received the cash. Some taxpayers - with the banks' co-operation - bought CDs with a long term. If they bought a CD that compounded for 5 years, they could defer tax on their accumulated interest until that final year. So the laws were changed to apply the exotic "original issue discount" rules to such CDs. Now, interest on a 5-year CD must be calculated at each year-end and the additional amount accumulated since last year must be reported as this year's income, even if you can't spend it until 2012! You must "amortize" the "discount" - the difference between the purchase price of the CD and the amount that you will receive at its maturity. So, each year-end, the bank must send you a Form 1099-OID reporting the current year's amortization of the discount.

The OID concept originally applied to instruments sold (originally issued) at a discount from their face value. The most familiar example was the US Treasury's "E" bond. You bought a $100 bond for $75. When it matured 10 years later, you got the $100 face amount. The $25 difference was interest income and it was all reported in the year you collected it by cashing in the bond, unless you elected to pay each year on that year's growth in the value of the bond. There are many other such investments.

But if Quicken has provided us a wizard or other convenient way to record the annual OID amortization, I haven't found it.

Since Quicken does not let us schedule Investment Transactions, I tried for a while to simply schedule the Interest Income deposits to my checking account. But then the income did not get tied to the CD that earned it. A $10,000 CD that paid a dozen $50 interest checks in a year would show zero return in Quicken's reports. To get the income credited to the CD, I had to use the Investment Transaction. For some of my CDs, I still use the two-step workaround: I schedule the checking account deposit, but as a zero amount; this is simply my reminder to go to my CDs account and enter the Investment Transaction, then Skip the checking reminder until next month.

Again, if Quicken now has a better way of handling this, please let me know.

RC

Thanks for the clarification, Jim and RC. I have a savings account at Emigrant Direct, where I also opened a 6-mo CD. Last year I got a

1099INT, but it did not include the interest for the CD, only the savings account. When I mentioned this to my dad (former int'l banker), he quoted what is apparently old info, according to RC.

Doing further poking around, I see ING Direct has a 9-mo CD paying 5.25% right now, a little more than my Emigrant Direct CD which is about to mature and pay less than the current 5.20%. So I opened a CD at ING and will not renew the Emigrant CD. Further, I noticed ING allows (optional) interest disbursements from their CDs, which Emigrant Direct doesn't. Interesting.

RC, sorry if I implied that I thought CDs were a bad investment. On the contrary, I was thinking if they're a pain to manage in Quicken, I might not bother with them (or keep them to a minimum).

Anyway, thanks to you both for the information. I will post back as I use Quicken's interest tracking further.

Regards,

Margaret

Jim Ors> Hi Margaret:

I've been following this with a little interest, but not because I own CDs or use a Q CD account. Rather, I'm interested in the efforts people put forth to get Q to download the correct financial data into a tax program so one's taxes are correct.

I have two rentals, a couple of taxable bank accounts, the usual charitable cash contributions and real-estate and tax deductions. I don't download any of it from Q to TurboTax...because I don't trust Q's ability to reliably do so. Instead, I rely first on institutions'

1099 forms. Then I'll use Q to generate reports for things like charitable contribs during the tax year, and spot check the report against paper records, my general recollection, and last year's data (TT makes the latter easy).

Hi RC,

Quicken does support scheduled Investment Transactions, and has as far back as I can remember. I don't know if the capabilities meet your needs, but check the Quicken Help Index under "scheduled transactions, investments".

I used them for a while, but don't any more, so I don't remember the details. I do recall that you handle associated transactions, e.g. dividend payments and transfers of the payments to a banking account, by placing the associated transactions in the same transaction group.

For some recurring investment transactions, notably dividend payments, I use your "scheduled reminder" trick but with the actual amount rather than zero. Since I'm going to Skip it anyway it doesn't matter that the amount isn't zero. This usually saves me the trouble of looking up the actual amount. I'm not recommending this change for you, but I like it for my purposes.

And if you or anyone else own any Tbills and have any easy way to handle them properly in Quicken, I'd sure like to know about it. For every reinvested Tbill, I have to manually create the new security, enter a Buy and Xout on the purchase date and a Sell and IntInc on the maturity date. For laddered Tbills this is an absolute nuisance.

Jerry

P.S. I wish my accounting expertise were growing as fast as yours in computing - you're becoming a real computer nerd :-)

Hi, Jerry.

Well, I'm starting to get the hang of it. But I've only been fiddling with "microcomputers" since 1977, so I still have a lot to learn. ;

I have a number of CD's & at first I set each one up as a 'Security' .. no good .. now I have one account called CD's, the interest I have credited to other a/c's and it comes down when I download.

I treat each CD as a 'cash' transaction and like you I name them Inst/mat date & Interest rate.

If they rollover I have to do a dummy cash out & back in to update the interest rate and purchase date .. it's crude but it seems to work. As far as tracking them the bank will send a maturity notice 1 month prior, and at maturity you have 6 business days to cash in, pull out or add to .. at this time I go to the bank and 'negotiate' a better rate (they always go down on a roll) or I cash in and go to another bank.

As far as tax goes I get 1009-INT's for everything credited to me for that year.

Sorry, never heard of laddering.