What Category for Early Withdrawal

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bhata wrote:

I waited a day for someone else to reply, but I don't understand the context of your question....I am assuming you're withdrawing the funds in your CD that haven't matured fully, and you're losing some interest, like perhaps a month's worth for the early penalty.
I would think that the "category" for your withdrawal would actually be another Quicken account in which the money is actually moving to, wouldn't it? Either a existing savings/checking account you have defined in Quicken, or perhaps [CASH] if you withdraw the funds in paper.
And why would there be a tax line? It's your capital that's being received.
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For the early redemption of a CD, there's frequently a penalty imposed.
So, if you have a CD that's due in, say, 12/2009, and you redeem it this month there may be a penalty of as much as 3-months interest.
Probably the easiest way to record this is to SELL the CD investment (which is how you'd show the redemption anyway) and use MiscExp transaction to record the penalty and a CashOut to move the balance to another account (presumably, your checking acct).
db
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bhata wrote:

Say you had deposited a Principle sum P into a CD. You will either have had monthly interest payments deposited into the CD or mailed to you. The interest should be categorized as "Taxable Interest".
When you withdraw, or Close, the CD, you will either receive a check for the amount of P plus Interest less Penalty, or that amount will be deposited into another account. You would record that event as an account transfer. The interest and penalty payments should be, or have been, categorized as "Taxable Interest". The return of Principle is not a taxable event.
At the end of the tax year, you should receive a 1099INT form showing the amount of interest paid and any penalty. The information on the 1099INT should be entered into your Tax Forms, or Tax Program. The info on the 1099 should agree with what you have previously entered into Quicken,
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You should create an expense category for "CD early withdrawal penalty" and assign it a tax item of "Form 1040:Early withdrawal penalty".
The 1099-INT you receive from the payer should show an amount in Box 2, and this should carry to the Form 1040 line 30. You cannot claim this expense on form 1040-A nor 1040-EZ.
scott s. .
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Hi, Bhata.
What Scott S. said.
Your question should not have asked about "Early Withdrawal", but about a "Penalty for Early Withdrawal". There is a specific line for this (Line 30, under Adjustments) on page 1 of Form 1040. You will report the penalty on this line, AFTER reporting the full interest income on Schedule B, and let TurboTax do the math for you.
In Quicken, the simplest way probably is record it as a reduction of your interest income category. But if you want to keep track of the penalty - if it occurs more than once and you want to see the total, for example - then create a new Category for it. Theoretically, it would be a "negative income" amount (recorded as a minus in an income category), but unless you are extremely picky, just show it as a minus number in your income expense category. Or you could, if you prefer, create a new expense category for such penalties. How you record it in Quicken is really up to you, but do it the IRS way on your tax return.
RC
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On Friday, March 20, 2009 1:15:53 PM UTC-7, bhata wrote:

I'm facing this issue right now as the ACTIONS are pre-established. There is no ACTION for the penalty.
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On Friday, March 20, 2009 1:15:53 PM UTC-7, bhata wrote:

I'm facing this issue right now as the ACTIONS are pre-established. There is no ACTION for the penalty. -----------------------------------------------------------------------------------
I believe the "penalty" is just a loss of some of the interest. I'd just use the same category that was used for the interest earned ... reducing the amount of interest earned.
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On 04/17/14 8:56 AM, John Pollard wrote:

I believe that for tax purposes that is not correct. Early withdrawal is reported on Form 1040, line 30 and requires a separate category. There is a Tax Line Item for 1040 under the Tax Related Tab for a Category in Quicken. I have not found a built in Category and one may have to be added.
John B.
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Hi, John - and John.
Yes. Report the interest income normally. Then treat the penalty as an "Adjustment" at the bottom of Page 1 of Form 1040; Line 30, "Penalty for early withdrawal of savings". The penalty does not reduce "Total Income", but is a factor in determining "Adjusted Gross Income'.
In Quicken 2013 you can find a very sparse version of this advice by clicking Help, then typing "early withdrawal penalty" into the "iSeek" box, and then click "How do I enter adjustments to income". Under Item 5, click "Tell me more" and...FINALLY you can read this paragraph:
"If you withdraw funds from a time savings account before maturity, you may be charged a penalty. You must report the gross amount of interest paid or credited to your account during the year, without subtracting the penalty. Deduct the entire penalty even if it exceeds your interest income. The Form 1099-INT, or similar statement from your financial institution, shows the gross amount of interest and the penalty."
Many of us - including myself - have griped for years that Quicken programmers/developers/executives have no idea of how to properly record CDs. The Help file does tell us how to record interest payments received on CDs, but I've not found any guidance on how to record the PURCHASE or REDEMPTION of a CD - or to record COMPOUNDED INTEREST on one. :>( Closest Quicken can come is to treat a CD like a bond!
RC -- -- R. C. White, CPA San Marcos, TX (Retired. No longer licensed to practice public accounting.) snipped-for-privacy@grandecom.net Microsoft Windows MVP (2002-2010) (Using Quicken Deluxe 2014 R 7 and Windows Live Mail in Win8.1 x64)
"John Beurket" wrote in message wrote

I believe that for tax purposes that is not correct. Early withdrawal is reported on Form 1040, line 30 and requires a separate category. There is a Tax Line Item for 1040 under the Tax Related Tab for a Category in Quicken. I have not found a built in Category and one may have to be added.
John B.
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