Withholding Federal 401K tax in Tax Report?

"Andrew" wrote

Just took some money out of a 401K (my first time). I had the FI withhold some portion of it for Federal taxes owed. The FI downloaded the sale as gross, so I am trying to indicate to Quicken that some of this money should go to a Federal Tax category to show up in the "Tax Report". But when I have entered a 'withdraw cash' transaction and categorize it as a tax category of "1099-R: IRA Fed Tax Withheld", it doesn't seem to show up in the Quicken supplied tax report, despite this new category showing up in the category list as a tax-line item.

------------------------------------------------------------

John, thank you! I will read and digest.

I note on a thread on that page the following caveat: "1) The withholdings must be recorded in a taxable account in order for QWin to pick them up in the tax reports - they must be outside the 'tax-deferred' shield of the IRA."

Looks like I'll have to try to be REAL creative here to figure this out since the IRA account that I want to debit the w/d is indeed a 'tax-deferred' shield of the IRA.'. I don't think i can do what I want which really is to simply have Q keep track of this for the tax report which was my original issue.

Or perhaps I could move the withholding to a cash account I have for ATM withdrawals, and then 'pay' the IRS from that non-tax account with appropriate documentation.

Where's RC White when you need him? He was good in these types of things!

Tax deferred because it is taxable when withdrawn not when you placed it in the 401k while a Roth is with money already taxed.

You enter income equal to total of what was withdrawn from 401k. In Quicken just split the deposit into two items as income(taxable) reduced by tax withheld and paid for you direct from the 401k. Check the Q annual itemization report to see that your use of the negative tax amount in the income transaction shows as a tax paid under expenses.

"Andrew" wrote I note on a thread on that page the following caveat: "1) The withholdings must be recorded in a taxable account in order for QWin to pick them up in the tax reports - they must be outside the 'tax-deferred' shield of the IRA."

Looks like I'll have to try to be REAL creative here to figure this out since the IRA account that I want to debit the w/d is indeed a 'tax-deferred' shield of the IRA.'. I don't think i can do what I want which really is to simply have Q keep track of this for the tax report which was my original issue.

Or perhaps I could move the withholding to a cash account I have for ATM withdrawals, and then 'pay' the IRS from that non-tax account with appropriate documentation.

----------------------------------------------

I'm not sure I understand what you mean when you say, " ... the IRA account that I want to debit the w/d is indeed a 'tax-deferred' shield of the IRA."

The FAQ I pointed to does expect that you are withdrawing from a tax-deferred account (i.e., that the RMD is withdrawn from a tax-deferred account).

The key is that the tax payments not be recorded in a tax deferred account.

The way to accomplish that is to record the transaction in a taxable account, using a split transaction to withdraw the amount of the RMD from the tax-deferred account into the taxable account. In that same split transaction in the taxable account, you have one split line for each tax payment you make.

So, for example, perhaps the split transaction in the taxable account looks like this:

- Split line 1: $500 transfer from the tax-deferred account (the gross amount amount of the RMD)

- Split line 2: $100 federal tax category

- Split line 3: $20 state tax category

That's the problem. In the "TAX SUMMARY", (A specific report within the TAX category in the report menu) no matter what expense category you use to account for the tax withheld (as in your negative entry explanation), since it is being used within a tax-protected account, it does not show up within that SPECIFIC report.

I am traveling with iPad and no Quicken access but a 401k IRA is not a tax protected account as I remember and I think you have designated it in Q incorrectly. A ROTH IRA is a tax protected account.

Give it a shot when you get back and let me know. But a couple of points:

1. There is no such thing as a "401k IRA" account. But both ARE a tax protected account in terms of how Quicken deals with them, *I believe*. (Both grow tax deferred until one takes a qualified withdrawal. For a Traditional IRA and a non-Roth 401K, the gains are taxed as ordinary income.)

Secondly, all I am trying to do is to someone account in my Quicken register using a hypothetical $10,000 grosd distribution that I have a $6,000 NET deposit with a $4,000 Federal Tax Withholding AND show that in the TAX REPORT.

But the 401K is *not* a taxable account. And your idea "- Split line 2: $100 federal tax category" does NOT show up in the TAX report...that's exactly what I was hoping for. Since that category in this case is being used within a non-taxable account, it does not appear in the TAX report.

Let's take this again using a $10,000 withdrawal, telling Fidelity to withhold %4,000 in Fed Taxe, and the net to go to my credit union account.

Theoretically, I should have $6,000 NET somewhere in all of Quicken after all is said and done.

1.When the transaction is downloaded directly into Q, it is recorded as a SOLD transaction with the GROSS proceeds going into the same account name as the Fidelity account when one looks at the SOLD dialog box right after the download. I have not touched that (yet). But there is NO increase in any balance of any type in Q, just the single $10,000 value is less in all my assets at Fidelity. So where did the $10,000 go?? 2.To FORCE a $10,000 increase in my total assets, within the "RECORD PROCEEDS?" portion of the edited SELL transactions I click " TO THIS ACCOUNTS CASH BALANCE" box, changing the default "TO" selection I mentine above that Q accepted from Fidelity that had the 401K account name in it originally from the transaction. 3.So now I have $10,000 more in Q, but in reality, $6,000 was automatically being sent to my credit union,and $4,000 is going directly to the IRS. 4.You can't just make a negative transaction for this $4,000 using a tax category because as I mentioned, that will NOT show up in a TAX REPORT since the 401K is a tax-related account in Q's eyes. I can do a withdraw $6,000 cash for the remaining $6,000K indicating my credit union receives that amount fine. 5.So as in my other post, I suppose I can make a $4,000 trans to a CASH account and then negate that value using the 1099 IRA withdrawal category so it shows up in the Q Tax report, bus this is cludgy.

So if you don't follow all of this, no problem!

"Andrew"

But the 401K is *not* a taxable account. And your idea "- Split line 2: $100 federal tax category" does NOT show up in the TAX report...that's exactly what I was hoping for. Since that category in this case is being used within a non-taxable account, it does not appear in the TAX report.

Let's take this again using a $10,000 withdrawal, telling Fidelity to withhold %4,000 in Fed Taxe, and the net to go to my credit union account.

Theoretically, I should have $6,000 NET somewhere in all of Quicken after all is said and done.

1.When the transaction is downloaded directly into Q, it is recorded as a SOLD transaction with the GROSS proceeds going into the same account name as the Fidelity account when one looks at the SOLD dialog box right after the download. I have not touched that (yet). But there is NO increase in any balance of any type in Q, just the single $10,000 value is less in all my assets at Fidelity. So where did the $10,000 go??

2.To FORCE a $10,000 increase in my total assets, within the "RECORD PROCEEDS?" portion of the edited SELL transactions I click " TO THIS ACCOUNTS CASH BALANCE" box, changing the default "TO" selection I mentine above that Q accepted from Fidelity that had the 401K account name in it originally from the transaction.

3.So now I have $10,000 more in Q, but in reality, $6,000 was automatically being sent to my credit union,and $4,000 is going directly to the IRS.

4.You can't just make a negative transaction for this $4,000 using a tax category because as I mentioned, that will NOT show up in a TAX REPORT since the 401K is a tax-related account in Q's eyes. I can do a withdraw $6,000 cash for the remaining $6,000K indicating my credit union receives that amount fine.

5.So as in my other post, I suppose I can make a $4,000 trans to a CASH account and then negate that value using the 1099 IRA withdrawal category so it shows up in the Q Tax report, bus this is cludgy.

---------------------------------------------------------------

Andrew,

Once again: the gross amount of the RMD should be transferred out of the tax-deferred account into a NON-tax-deferred account. [In your case, I am assuming your "credit union" account is a non tax-deferred account.]

I did NOT say to record the taxes in the tax-deferred (the 401k) account, I'm not sure how you could have arrived at that conclusion. I said to record the taxes in a NON-TAX-DEFERRED account. [Quoting myself: "The key is that the tax payments not be recorded in a tax deferred account."]

According to your comments, you sold something in the tax-deferred (the

401k) account which produced cash in that account. It is that cash (presumably the gross amount of the RMD) that you need to transfer OUT of the tax-deferred (the 401k) account and INTO a NON tax-deferred account. [Let the sell transaction record the cash in the tax-deferred (the 401k) account (in other words: leave the sell transaction alone).]

Then create a "Cash transferred out of account" transaction (in the tax-deferred account), that will remove the gross amount of the RMD from the tax-deferred (the 401k) account, and add the gross amount of the RMD to the destination non-tax-deferred account (your credit union account).

It is the "Cash transferred out of account" transaction that will record your gross RMD to the appropriate tax category ("1099-R:Total IRA taxable distrib." - as noted in the FAQ I pointed you to earlier). Then all that's left to do is to record the taxes.

In the NON-tax-deferred account (the credit union account) edit the transfer transaction that was created by the "Cash transferred out of account" transaction above ... make the NON-tax-deferred account transaction a split transaction by adding the appropriate tax split lines (with negative amounts) ... click the split transaction "Adjust" button (causing the transaction amount to become the "net" amount you received after taxes), and save the transaction.

When the tax split lines are recorded in a non tax-deferred account, they will appear in your tax reports.

"Andrew" wrote

Let's take this again using a $10,000 withdrawal, telling Fidelity to withhold %4,000 in Fed Taxe, and the net to go to my credit union account.

Theoretically, I should have $6,000 NET somewhere in all of Quicken after all is said and done.

------------------------------------------------------------------------

I forgot to provide the details for your $10,000 transaction.

1.) In the 401k account:

- Edit Account Details

- Click the Tax Schedule button

- In the "Transfers out" dropdown, select "1099-R;Total IRA gross distrib."

2.) In the 401k account: Transfer $10,000 from the 401k account to the credit union account, using the "Cash Transferred out of Account" transaction.

3.) In the credit card account: modify the resulting $10,000 credit union account transfer transaction to be a split transaction:

- split line one remains as the transfer of $10,000 from the 401k account

- new split line two is -$4000 categorized to federal income taxes Click the split transaction "Adjust" button (and click Enter), which will cause the resulting transaction to be a deposit in the credit union account of $6000.

Ah, good. I'll give this a shot and see if it works which I think it does. This basically takes the Fed tax deduction as a category within a taxable account which indeed should show up; it doe what my idea of putting it into a cash account but is clearer as it is dealing with only the 401K and the CU accounts,not 3. Thanks!

Yep, this worked. Thanks John.