>
> ---------- Forwarded message ----------
> From: John Ralls <jra...@ceridwen.us>
> To: stepbystepf...@comcast.net
> Cc: gnucash-user@gnucash.org
> Bcc:
> Date: Fri, 2 Apr 2021 19:43:55 -0700
> Subject: Re: [GNC] Tax deferred account transfers suggestion
>
>
> > On Apr 2, 2021, at 1:02 PM, Michael or Penny Novack <
> stepbystepf...@comcast.net> wrote:
> >
> > On 4/2/2021 2:44 PM, David G. Pickett via gnucash-user wrote:
> >> It'd be nice if the transfers from tax deferred accounts (401k, IRA) to
> not tax deferred showed as taxable income on the tax report. Reverse
> transfers might also be listed as tax deductions.
> >
> > It would help you to understand the issues if you tried to record this
> transaction without gnucash (do it the old fashioned way, on paper).
> >
> > This is not the only "interesting" situation involving taxable income.
> In this case, money WAS being transferred, debit some bank account, credit
> the 401k account. But take an example where you received NOTHING tangible
> but were informed you had some taxable income. You need an example?
> >
> > As an employee benefit, an employer is allowed to pay the premiums on a
> life insurance policy on the employee's life, the employee getting to
> choose the beneficiary. Generally the employer makes this benefit "one
> year's salary" of life insurance. By US tax code, this is not considered
> taxable income to the employee up to $50,000 of insurance coverage. But
> suppose that employee made $60,000 per year so the insurance coverage was
> for that amount. The premium on $10,000 of that (the amount over $50,000)
> would taxable income to the employee.
> >
> > << this is really the same problem -- the issue is, what is the debit
> side of that credit >>
> >
>
> If there are any non-USA-citizens reading you can stop now, this is all
> about US tax and retirement law.
>
> Michael,
>
> I thought you were old enough to be experiencing this directly! ;-)
>
> With so-called traditional (i.e. non-Roth) IRAs and most 401K plans once
> you attain age 65 you may begin withdrawing and once you reach 72 you
> *must* begin withdrawing. In most cases the contributions and in all cases
> the gains and earnings in the retirement account were not taxed, so the
> withdrawals are taxed as part of ordinary income. No capital gains.
>
> As David T. observes from an accounting standpoint there's no income
> account involved, you're transferring from the IRA/401K account to your
> regular bank/brokerage account. However, I'd think it possible for the Tax
> Report Options to tag the account and notice credits to it. Whether and how
> that might be wired into the TXF format I have no idea, I don't use the TXF
> report.
>
> Regards,
> John Ralls
>
One approach you could take is to have to have income accounts called
something like "Non-Taxable Income - 401(k) Contributions" which is not
tagged in the Tax Report Options, another called something like "401(k)
Withdrawals - Contra" which is not tagged in the Tax Report Options, and
"Taxable Income - 401(k) Withdrawals" which is tagged in the Tax Report
Options.
At the time of the contribution you enter:
Dr. 401(k) Asset Account
Cr. Non-Taxable Income - 401(k) Contributions
Your income statement would include the amount as income but your tax
report would not.
At the time of withdrawal you enter:
Dr. Non-401(k) Asset Account
Cr. 401(k) Asset Account
Dr. 401(k) Withdrawals - Contra
Cr. Taxable Income - 401(k) Withdrawals
Your income statement would not include the withdrawal as income (since the
last two entries cancel each other) but your tax report would.
Regards,
Alex
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