Re: [GNC] IRA/401K income detection
On 3/17/2022 4:41 PM, David G. Pickett via gnucash-user wrote: Lots of fun interest here! Not exactly looking for accounting advice, except how to properly encode this well understood activity so it generates a tax report item. Can we devise a GNUCash programatic enhancement of the double entry bookkeeping system that sees such transfers from a deferred tax account to a not deferred tax account also as taxable income (and the reverse as tax sheltered, negative income), or automatically move the money via an appropriate 4-split? Can we lock the automatic 4-split so it cannot be mangled out of balance? a) The "general" transaction does not only involve two accounts. Gnucash doesn't need an enhancement for this. Perhaps part of the problem is the terminology "split". Another part of the problem is that many of us never learned the old fashioned way, enter into the JOURNAL and then post to the LEDGER. The reality is that because MOST transactions are "special case -- only two accounts involved" gnucash is giving us a shortcut, enter directly in the ledger account of one of those accounts. We can SKIP the "journal step". Perhaps the description could have been better and the "split" button labeled a more explicit "enter journal mode". Because THAT is what we are doing. If more than two accounts we enter the transaction into the journal and this gets posted when we complete with Again, this is obvious to those of us who learned bookkeeping in the old pen and ink on paper days. BUT --- the special case allowed shortcuts even then, aka "cashbook" accounting. It was observed that 90+% of transactions involved "cash" on one side and a small set of "popular" accounts. So a mini-ledger for JUST these, no journal, enter just like we do most of the time with gnucash. Then once a day, once a week, once a month, bottom of each page (depends on volume) the cashbook mini-ledger closed to the general ledger. Meanwhile transactions affecting other accounts entered into the journal and posted individually. to the general ledger. b) No, could not automate because a special case (of the general "more than two accounts" case). It just happens that in THIS case the amounts are all the same. But gnucash can't assume that. For example, your organization sells tee shirts. The transaction of a sale is debit cash and "cost of goods sold" and credit "sales" and "tee shirt inventory". << if those amounts were the same your organization makes no profit --- and you really did need to track this way because SOMETIMES your organization might give tee shirts to volunteers and then it is debit "volunteer recognition" expense and credit "tee shirt inventory". BTW -- you really do need "sales" and "cost of goods sold" as those are line items on the 990/990EZ c) Receiving taxable income has an (as yet( unknown affect on your "tax liability":. You won't know THAT until doing your taxes because might be conditional on other income and/or non-refundable credits. Items of taxable income will be components of figuring "taxable income". Look, this began with talk of IRA/410k distributions which implies of age to be getting Social Security. Are people not doing their own taxes so miss the nitty gritty? Social Security income starts out not being taxed BUT if "other taxable income" plus 1/2 social security > $32,000* then social security begins to be taxed (moves to taxable income) up to a maximum of 85%. In other words, taxable income doesn't just have its own tax liability but can make you liable for tax on otherwise untaxed income. Michael D Novack * If married, filing jointly << I don't know for other filing status off the top of my head >> ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Lots of fun interest here! Not exactly looking for accounting advice, except how to properly encode this well understood activity so it generates a tax report item. Michael D Novack seems to be hinting how to do this, creating the 100% pretax IRA/401K account in equity and, assuming it is already in existence when you start GNUCash, using deferred income not opening balance to load it with money and stocks. Can you add stocks as deferred income? I guess, just a different currency! As dividends arrive, they need to be characterized as deferred income, too, even though they get used to buy more shares. So we are chugging along, but now I get to distributions. When I move money from the IRA to the bank account, if I do it without a 4-split, it is just a transfer and of no interest to the tax report, never mind being characterized as income. I am actually happy if it just hits the tax report, as transfers as a 2-split are just between 2 net worth accounts. Will that happen, or would that be some kind of enhancement: a band aid over the limits of the double entry bookkeeping system? The 4-split seems a pretty crude thing, and especially ugly if it gets mangled out of balance in some update! Can we devise a GNUCash programatic enhancement of the double entry bookkeeping system that sees such transfers from a deferred tax account to a not deferred tax account also as taxable income (and the reverse as tax sheltered, negative income), or automatically move the money via an appropriate 4-split? Can we lock the automatic 4-split so it cannot be mangled out of balance? ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Thanks for the detailed reply. I apologize to you and everyone else for the tone of my reply; I didn't intend to insult anyone or malign accountants in particular. Sometimes my frustrations get the better of me, and I see note that this occurred in this situation. Sorry. Original Message From: Stan Brown Sent: Thu Mar 17 09:48:26 EDT 2022 To: gnucash-user@gnucash.org Subject: Re: [GNC] IRA/401K income detection On 2022-03-16 17:49, D. via gnucash-user wrote: > But one of the big selling points of IRA/401Ks is that they earn > money tax deferred (which I've also isolated into their own income > accounts). How does Joe allocate the distributions-- or does it > even matter? Each distribution is going to include a portion of > deferred income and a portion of untaxed dividends (at least how ? I've captured the txns thus far). Is there a different way to > manage those dividends? Were _all_ of your IRA or 401(k) contributions pretax money, or did you pay income tax on any of them when you made the contributions? I'm going to assume it's the former, which is the most common situation. In that case, there is no need to keep separate track of dividends and gain in asset value. As far as the tax code is concerned, it's all ordinary income when you withdraw it, and there's no allocation of how much is gains, how much is dividends, and how much is your original contribution. If you made any contributions that were _not_ deducted at the time, then only a portion of your withdrawal is taxable. The basic idea is to divide your original contributions by the current total value, then multiply by the amount of the withdrawal, and that amount is non-taxable. But it's more complicated than that: you have to keep track of your "basis" from year to year, and file form 8606 each year you make a non-deductible contribution or take any withdrawal. But still there's no distinction between dividends and asset value gains. Since you don't have to account for dividends for tax purposes in either case, you're free to allocate the withdrawal any way you please. Or you could drop the dividend account entirely, which is what I do. > Yeah, I get that an accountant doesn't call this income, but frankly, > I don't really care about the esoterica of accounting in this case. I > care about what the government says is income. Accountants can yap all > day long about how the IRA payouts aren't income; the IRS is still > going to fine me if I don't pay up. If you call a withdrawal income, then you're going to make a credit entry to some income account. You will also make a credit entry to the asset account for the amount of the withdrawal. There will be a corresponding debit entry to Cash/Banks for the withdrawal. What will be your corresponding debit entry to the credit entry for income? -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 3/16/2022 8:49 PM, D. wrote: Michael, I think I get what you're saying. In my own case, I've taken to separating the pretax streams into their own income accounts, which seemingly addresses some of your points. But one of the big selling points of IRA/401Ks is that they earn money tax deferred (which I've also isolated into their own income accounts). How does Joe allocate the distributions-- or does it even matter? Each distribution is going to include a portion of deferred income and a portion of untaxed dividends (at least how I've captured the txns thus far). Is there a different way to manage those dividends? If the contributions are all "pre-tax" then they are "deferred income" . The "deferred income" account would have been used when you entered the transaction for a contribution. What the account has earned is also all "deferred income". If you were entering transactions to record the increase in value of your 401K, that would have been the other side of the transaction. Note that it is "deferred ordinary income and not "deferred capital gains" If the 401k existed before you began with gnucash, the probable cause was entering the starting balance using the "tool" (so other side "starting equity"). It should have been "deferred income" << you could still use the tool -- when you created "deferred income" (probably under equity) with the same starting value that would have taken it out of "starting equity". Understand? Yes "deferred income" is part of your equity but it is different than your other equity because it has an attached tax liability. Michael D Novack PS --- Bears repeating, but a "manual" is not a "user guide". We really should not be advising users about things like this. In other words, the question isn't "how do I enter transactions related to a 401k" but "what accounts, what transactions, would I be using when accounting for a 401k". That's for a tax accountant to tell you, or you look it up. I am not legally qualified to answer "tax accountant" sorts of questions. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 2022-03-16 17:49, D. via gnucash-user wrote: > But one of the big selling points of IRA/401Ks is that they earn > money tax deferred (which I've also isolated into their own income > accounts). How does Joe allocate the distributions-- or does it > even matter? Each distribution is going to include a portion of > deferred income and a portion of untaxed dividends (at least how ? I've captured the txns thus far). Is there a different way to > manage those dividends? Were _all_ of your IRA or 401(k) contributions pretax money, or did you pay income tax on any of them when you made the contributions? I'm going to assume it's the former, which is the most common situation. In that case, there is no need to keep separate track of dividends and gain in asset value. As far as the tax code is concerned, it's all ordinary income when you withdraw it, and there's no allocation of how much is gains, how much is dividends, and how much is your original contribution. If you made any contributions that were _not_ deducted at the time, then only a portion of your withdrawal is taxable. The basic idea is to divide your original contributions by the current total value, then multiply by the amount of the withdrawal, and that amount is non-taxable. But it's more complicated than that: you have to keep track of your "basis" from year to year, and file form 8606 each year you make a non-deductible contribution or take any withdrawal. But still there's no distinction between dividends and asset value gains. Since you don't have to account for dividends for tax purposes in either case, you're free to allocate the withdrawal any way you please. Or you could drop the dividend account entirely, which is what I do. > Yeah, I get that an accountant doesn't call this income, but frankly, > I don't really care about the esoterica of accounting in this case. I > care about what the government says is income. Accountants can yap all > day long about how the IRA payouts aren't income; the IRS is still > going to fine me if I don't pay up. If you call a withdrawal income, then you're going to make a credit entry to some income account. You will also make a credit entry to the asset account for the amount of the withdrawal. There will be a corresponding debit entry to Cash/Banks for the withdrawal. What will be your corresponding debit entry to the credit entry for income? -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
And Stan has now given the breakdown of the splits to accomplish it. That would be followed up with: Dr. Liability:Taxes payable Cr. Checking when they are physically paid. Regards, Adrien On 3/16/22 7:54 PM, D. via gnucash-user wrote: Yeah, I get that an accountant doesn't call this income, but frankly, I don't really care about the esoterica of accounting in this case. I care about what the government says is income. Accountants can yap all day long about how the IRA payouts aren't income; the IRS is still going to fine me if I don't pay up. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Good to know, thanks for the clarification. Regards, Adrien On 3/16/22 6:49 PM, D. via gnucash-user wrote: Oh, I know about using the tax flag and TXF report. Done it for years. But unless you figure out how to do what Mike has mentioned (consistently over the years), if you flag these accounts as tax-related, they still don't show as income, because you're transferring money from one asset account to another. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Yeah, I get that an accountant doesn't call this income, but frankly, I don't really care about the esoterica of accounting in this case. I care about what the government says is income. Accountants can yap all day long about how the IRA payouts aren't income; the IRS is still going to fine me if I don't pay up. Original Message From: Stan Brown Sent: Wed Mar 16 20:32:51 EDT 2022 To: gnucash-user@gnucash.org Subject: Re: [GNC] IRA/401K income detection On 2022-03-16 15:09, D. via gnucash-user wrote: > when Joe Retiree takes money from their IRA, the IRS considers it income, and > taxes it accordingly. But when Joe tries to enter the transfer from their IRA > to their checking account in GnuCash, it doesn't get treated as income -- Stan Brown Tehachapi, CA, USA https://BrownMath.com Because it _isn't_. (The tax code's definition of income is not the same as an accountant's.) It is a debit to the asset of Cash/Banks, and a credit to the asset of investments. As several people have said, this can be record as the above simple 2-split transaction, in which case taxes are tidied up later when the income tax is paid, or as a four-way split: Debit: Assets:Cash/Banks Credit: Assets:IRA Credit: Liability:Taxes payable Debit: Expenses:Income tax -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Michael, I think I get what you're saying. In my own case, I've taken to separating the pretax streams into their own income accounts, which seemingly addresses some of your points. But one of the big selling points of IRA/401Ks is that they earn money tax deferred (which I've also isolated into their own income accounts). How does Joe allocate the distributions-- or does it even matter? Each distribution is going to include a portion of deferred income and a portion of untaxed dividends (at least how I've captured the txns thus far). Is there a different way to manage those dividends? I started receiving pension payouts, and they dutifully inform me every year how much of those payouts were from my own contributions, and how much from their pot. The IRS seems to care about these distinctions, but, I honestly don't know. Maybe I'm just overthinking this? David T. Original Message From: Michael or Penny Novack Sent: Wed Mar 16 19:10:50 EDT 2022 To: gnucash-user@gnucash.org Subject: Re: [GNC] IRA/401K income detection On 3/16/2022 6:09 PM, D. via gnucash-user wrote: > Adrien, > > Overall, I think you're right, but I believe the tax features you're > referring to are used to calculate taxes for a business? The issue with > deferred income-- and this has been true for as long as I can remember-- is > that when Joe Retiree takes money from their IRA, the IRS considers it > income, and taxes it accordingly. But when Joe tries to enter the transfer > from their IRA to their checking account in GnuCash, it doesn't get treated > as income, and there doesn't appear to Joe to be a straightforward way in > GnuCash to make it into income that they can track for taxes. That is a > decidedly different tax issue than the one you've mentioned, IMHO. > > David T. There was the reverse problem when the contribution was made. The solution used then (if 401k treated as an asset) would cancel the "problem" now. The problem is that I am willing to bet that the books were opened with a starting amount for the 401k, opposite side "starting equity". Instead, the credit side of that should have been a "deferred income" account << that could well be placed under equity >> So a distribution transaction is then a transfer between the assets "401k" and "cash" AND a transfer between "deferred income" and "income". Michael D Novack ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 2022-03-16 15:09, D. via gnucash-user wrote: > when Joe Retiree takes money from their IRA, the IRS considers it income, and > taxes it accordingly. But when Joe tries to enter the transfer from their IRA > to their checking account in GnuCash, it doesn't get treated as income -- Stan Brown Tehachapi, CA, USA https://BrownMath.com Because it _isn't_. (The tax code's definition of income is not the same as an accountant's.) It is a debit to the asset of Cash/Banks, and a credit to the asset of investments. As several people have said, this can be record as the above simple 2-split transaction, in which case taxes are tidied up later when the income tax is paid, or as a four-way split: Debit: Assets:Cash/Banks Credit: Assets:IRA Credit: Liability:Taxes payable Debit: Expenses:Income tax -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Oh, I know about using the tax flag and TXF report. Done it for years. But unless you figure out how to do what Mike has mentioned (consistently over the years), if you flag these accounts as tax-related, they still don't show as income, because you're transferring money from one asset account to another. Original Message From: Adrien Monteleone Sent: Wed Mar 16 19:20:57 EDT 2022 To: gnucash-u...@lists.gnucash.org Subject: Re: [GNC] IRA/401K income detection GnuCash also lets you mark accounts as tax implicated and you can I think tie them to certain 'lines' or certain 'forms'. That's used for personal taxes as well. I wasn't even thinking about the sales tax features for invoices/bills which is something entirely separate. If simply marking the relevant accounts are not enough to get it onto a Tax Report, then yes, virtual type tracking will be needed. Regards, Adrien On 3/16/22 5:09 PM, D. via gnucash-user wrote: > Adrien, > > Overall, I think you're right, but I believe the tax features you're > referring to are used to calculate taxes for a business? The issue with > deferred income-- and this has been true for as long as I can remember-- is > that when Joe Retiree takes money from their IRA, the IRS considers it > income, and taxes it accordingly. But when Joe tries to enter the transfer > from their IRA to their checking account in GnuCash, it doesn't get treated > as income, and there doesn't appear to Joe to be a straightforward way in > GnuCash to make it into income that they can track for taxes. That is a > decidedly different tax issue than the one you've mentioned, IMHO. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
GnuCash also lets you mark accounts as tax implicated and you can I think tie them to certain 'lines' or certain 'forms'. That's used for personal taxes as well. I wasn't even thinking about the sales tax features for invoices/bills which is something entirely separate. If simply marking the relevant accounts are not enough to get it onto a Tax Report, then yes, virtual type tracking will be needed. Regards, Adrien On 3/16/22 5:09 PM, D. via gnucash-user wrote: Adrien, Overall, I think you're right, but I believe the tax features you're referring to are used to calculate taxes for a business? The issue with deferred income-- and this has been true for as long as I can remember-- is that when Joe Retiree takes money from their IRA, the IRS considers it income, and taxes it accordingly. But when Joe tries to enter the transfer from their IRA to their checking account in GnuCash, it doesn't get treated as income, and there doesn't appear to Joe to be a straightforward way in GnuCash to make it into income that they can track for taxes. That is a decidedly different tax issue than the one you've mentioned, IMHO. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 3/16/2022 7:03 PM, Gyle McCollam wrote: Michael has the right approach. Recording this when taking income involves 4 account. However, don't forget that if it is coming from a Roth IRA there is no tax. 401K and Traditional IRA will involve a tax liability, but that is a whole other animal. Right about the Roth. But note that was an "after tax" contribution. Didn't go into deferred income so doesn't come out. Note that there COULD also have been after tax contributions to a 401K Michael Novack ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 3/16/2022 6:09 PM, D. via gnucash-user wrote: Adrien, Overall, I think you're right, but I believe the tax features you're referring to are used to calculate taxes for a business? The issue with deferred income-- and this has been true for as long as I can remember-- is that when Joe Retiree takes money from their IRA, the IRS considers it income, and taxes it accordingly. But when Joe tries to enter the transfer from their IRA to their checking account in GnuCash, it doesn't get treated as income, and there doesn't appear to Joe to be a straightforward way in GnuCash to make it into income that they can track for taxes. That is a decidedly different tax issue than the one you've mentioned, IMHO. David T. There was the reverse problem when the contribution was made. The solution used then (if 401k treated as an asset) would cancel the "problem" now. The problem is that I am willing to bet that the books were opened with a starting amount for the 401k, opposite side "starting equity". Instead, the credit side of that should have been a "deferred income" account << that could well be placed under equity >> So a distribution transaction is then a transfer between the assets "401k" and "cash" AND a transfer between "deferred income" and "income". Michael D Novack ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Michael has the right approach. Recording this when taking income involves 4 account. However, don't forget that if it is coming from a Roth IRA there is no tax. 401K and Traditional IRA will involve a tax liability, but that is a whole other animal. Thank You, Gyle McCollam Gyle McCollam 609.680.2326 Mobile gmccol...@live.com<mailto:gmccol...@gyleshomes.com> email From: gnucash-user on behalf of D. via gnucash-user Sent: Wednesday, March 16, 2022 6:09 PM To: Adrien Monteleone Cc: GnuCash-User Subject: Re: [GNC] IRA/401K income detection Adrien, Overall, I think you're right, but I believe the tax features you're referring to are used to calculate taxes for a business? The issue with deferred income-- and this has been true for as long as I can remember-- is that when Joe Retiree takes money from their IRA, the IRS considers it income, and taxes it accordingly. But when Joe tries to enter the transfer from their IRA to their checking account in GnuCash, it doesn't get treated as income, and there doesn't appear to Joe to be a straightforward way in GnuCash to make it into income that they can track for taxes. That is a decidedly different tax issue than the one you've mentioned, IMHO. David T. Original Message From: Adrien Monteleone Sent: Wed Mar 16 13:09:10 EDT 2022 To: gnucash-u...@lists.gnucash.org Subject: Re: [GNC] IRA/401K income detection I could be missing something, but I thought that was already covered by one of the answers. Also, I'm pretty sure the proper place to record and track that is in an Asset account, not Equity. As for the transactions, if you need to do virtual 'extra tracking' beyond just the physical withdrawal, you can do that all in one transaction rather than 2 or more. A transaction can have more than 2 splits. So you'll have your real splits modeling the real world movement of funds, then you can have additional pair(s) of splits that handle 'tax due' type of tracking. Finally, there are Tax Features built in. Have you investigated them and do they not address the 'tax due' tracking you are looking for? (you may not need additional accounts and virtual tracking transactions, just run a report) Sorry I can't help more specifically. I don't use GnuCash for such purposes. Plenty on this list do however. Someone is sure to be able to offer a step by step at some point. Regards, Adrien On 3/16/22 9:48 AM, David G. Pickett via gnucash-user wrote: > OK, not anything like an accountant, so my books have just asset, liability, > income, expense. Equity might be a better place for the IRA/401K, since it > is an asset with a varying value and an attached tax liability TBD. So, how > should I have set up such 100% pretax deferred income accounts to capture the > income when money is transferred out, preferably without two transactions > (talk about your double entry!)? ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
Adrien, Overall, I think you're right, but I believe the tax features you're referring to are used to calculate taxes for a business? The issue with deferred income-- and this has been true for as long as I can remember-- is that when Joe Retiree takes money from their IRA, the IRS considers it income, and taxes it accordingly. But when Joe tries to enter the transfer from their IRA to their checking account in GnuCash, it doesn't get treated as income, and there doesn't appear to Joe to be a straightforward way in GnuCash to make it into income that they can track for taxes. That is a decidedly different tax issue than the one you've mentioned, IMHO. David T. Original Message From: Adrien Monteleone Sent: Wed Mar 16 13:09:10 EDT 2022 To: gnucash-u...@lists.gnucash.org Subject: Re: [GNC] IRA/401K income detection I could be missing something, but I thought that was already covered by one of the answers. Also, I'm pretty sure the proper place to record and track that is in an Asset account, not Equity. As for the transactions, if you need to do virtual 'extra tracking' beyond just the physical withdrawal, you can do that all in one transaction rather than 2 or more. A transaction can have more than 2 splits. So you'll have your real splits modeling the real world movement of funds, then you can have additional pair(s) of splits that handle 'tax due' type of tracking. Finally, there are Tax Features built in. Have you investigated them and do they not address the 'tax due' tracking you are looking for? (you may not need additional accounts and virtual tracking transactions, just run a report) Sorry I can't help more specifically. I don't use GnuCash for such purposes. Plenty on this list do however. Someone is sure to be able to offer a step by step at some point. Regards, Adrien On 3/16/22 9:48 AM, David G. Pickett via gnucash-user wrote: > OK, not anything like an accountant, so my books have just asset, liability, > income, expense. Equity might be a better place for the IRA/401K, since it > is an asset with a varying value and an attached tax liability TBD. So, how > should I have set up such 100% pretax deferred income accounts to capture the > income when money is transferred out, preferably without two transactions > (talk about your double entry!)? ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 3/16/2022 10:48 AM, David G. Pickett via gnucash-user wrote: OK, not anything like an accountant, so my books have just asset, liability, income, expense. Equity might be a better place for the IRA/401K, since it is an asset with a varying value and an attached tax liability TBD. So, how should I have set up such 100% pretax deferred income accounts to capture the income when money is transferred out, preferably without two transactions (talk about your double entry!)? I was NOT describing "two transactions" although until you have gotten comfortable with "split" transactions (more than just two accounts involved) you could do it with two instead of a split. And it would be a "two way split" which is ordinarily a little harder than a one sided split but this is a special case where all amounts the same so not hard. The point is that this transaction (taking a distribution) is affecting more than two accounts. It is reducing the asset 401k and increasing the asset cash but ALSO moving that amount of deferred income to (current) income. And sorry -- I think you misunderstand "equity" as the term is sued in double entry bookkeeping. Review the introduction/basics. Michael D Novack ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection (David G. Pickett)
I handle qualified plans with 3 generic transactions. 1. Contributions to plan: credit cash (if making a contribution from a bank account) or wage income (if making the contribution directly from your paycheck), debit to your plan 2. Gains to your plan. Unrealized gains should adjust the plan balance automatically as you update prices of the underlying holdings. If you have realized gains, create an equity account called "Gains and Losses," credit that, debit your plan. 3. Distributions from your plan: if you want to track these tightly, it is easiest as two transactions (or really one four-line transaction). Create an equity account called "Qualified Plan Drawdowns" and a revenue account called "Qualified Plan Income." For each distribution: credit your plan, debit Qualified Plan Drawdowns, credit Qualified Plan Income, debit cash. Your "Qualified Plan Drawdowns" are essentially dividends - money you pay yourself. ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
I could be missing something, but I thought that was already covered by one of the answers. Also, I'm pretty sure the proper place to record and track that is in an Asset account, not Equity. As for the transactions, if you need to do virtual 'extra tracking' beyond just the physical withdrawal, you can do that all in one transaction rather than 2 or more. A transaction can have more than 2 splits. So you'll have your real splits modeling the real world movement of funds, then you can have additional pair(s) of splits that handle 'tax due' type of tracking. Finally, there are Tax Features built in. Have you investigated them and do they not address the 'tax due' tracking you are looking for? (you may not need additional accounts and virtual tracking transactions, just run a report) Sorry I can't help more specifically. I don't use GnuCash for such purposes. Plenty on this list do however. Someone is sure to be able to offer a step by step at some point. Regards, Adrien On 3/16/22 9:48 AM, David G. Pickett via gnucash-user wrote: OK, not anything like an accountant, so my books have just asset, liability, income, expense. Equity might be a better place for the IRA/401K, since it is an asset with a varying value and an attached tax liability TBD. So, how should I have set up such 100% pretax deferred income accounts to capture the income when money is transferred out, preferably without two transactions (talk about your double entry!)? ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 2022-03-16 07:48, David G. Pickett via gnucash-user wrote: > Equity might be a better place for the IRA/401K, since it is an asset If it's an asset (and I agree that it is), then I submit that Assets is the best place for it! -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
OK, not anything like an accountant, so my books have just asset, liability, income, expense. Equity might be a better place for the IRA/401K, since it is an asset with a varying value and an attached tax liability TBD. So, how should I have set up such 100% pretax deferred income accounts to capture the income when money is transferred out, preferably without two transactions (talk about your double entry!)? ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 3/13/2022 10:28 PM, David G. Pickett via gnucash-user wrote: I understand that one characteristic/weakness of the double entry system is that you cannot tag a transfer with an income or expense account. Still, accounting programs help prepare 1099R's, so there must be a way. Keeping deferred tax items a separate set of books would make income visible but assets would be divided. It'd be nice if there was some sort of account tax tag so transfers from pretax/tax deferred accounts to normal accounts would show on the tax report. My traditional 401k/IRA stuff is pure pretax, which I suspect is the overwhelming norm. Of course, my Roth is tax free! I am just too old/retired to put much into it! The issues might be clearer if you stepped back a bit. You have the IRA/401k in your books as an asset. HOW did this amount get there? What were all the parts of THOSE transactions? Hint: do your books include a "deferred income" (say under equity). If not, how did you enter the transactions of a contribution? (not just a transfer between assets but also in the same amount a transfer between income and deferred income). And how did you record the market increases of the IRA/401K except as a debit to the 401k and a credit to "deferred income". That's why some of us would NOT choose to have the 401k on our books as an asset. It's a "right" (to NOT receive income now but instead to receive it plus whatever it has earned over time at some later date). I think what has you confused is that it seems to have a clear "amount" associated with it so let's shift to a different sort of asset that is a right, an annuity. Its book value? That whatever you paid for it. That stays the same until the annuity is no longer in effect under the terms of the contract. Whoever is then keeping your books (winding them up) would write it off against equity just like any other "loss" that is is not first processed through expenses. Meanwhile it is a source of "rents" (series of scheduled payments) that are debits to cash and credits to income as received. Not transfers from the "value" of the annuity which best remains unchanged. Returning to your IRA/410k problem where you DO have it on your books as an asset with defined value. I suspect that was opening books with "starting values" but not having an account for "deferred income" (would have been for the same amount, opposite sense, since you say 100% before tax money it's all deferred income). You can fix that (split that amount off from starting equity to a "deferred" account under equity. Now your distribution transaction can work (debit both cash and deferred income and credit IRA and income -- all the amount of the distribution) Michael D Novack ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
(Sorry—I clicked the wrong reply button.) I’m not sure what you’re trying to accomplish. It sounds like you don’t want your books to exaggerate how wealthy you are by ignoring the tax liability of the transfer. When I transfer (withdraw) money from a tax-deferred retirement account I usually have them withhold some of it. If you don’t do withholding, you might set up a tax liability account that offsets the some of money you’ve transferred into your checking account. Of course those tax liabilities are only estimates until you actually do taxes at the end of the year. But that’s no different from estimating the tax liability you incur from income. Am I reading your concern properly? Eric Beversluis Short fiction at www.ericbeversluis.com On March 13, 2022 at 22:28:20, David G. Pickett via gnucash-user (gnucash-user@gnucash.org) wrote: > I understand that one characteristic/weakness of the double entry system is > that you > cannot tag a transfer with an income or expense account. Still, accounting > programs > help prepare 1099R's, so there must be a way. Keeping deferred tax items a > separate set > of books would make income visible but assets would be divided. > > It'd be nice if there was some sort of account tax tag so transfers from > pretax/tax deferred > accounts to normal accounts would show on the tax report. > > My traditional 401k/IRA stuff is pure pretax, which I suspect is the > overwhelming norm. > Of course, my Roth is tax free! I am just too old/retired to put much into it! > ___ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists > for more information. > - > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
I understand that one characteristic/weakness of the double entry system is that you cannot tag a transfer with an income or expense account. Still, accounting programs help prepare 1099R's, so there must be a way. Keeping deferred tax items a separate set of books would make income visible but assets would be divided. It'd be nice if there was some sort of account tax tag so transfers from pretax/tax deferred accounts to normal accounts would show on the tax report. My traditional 401k/IRA stuff is pure pretax, which I suspect is the overwhelming norm. Of course, my Roth is tax free! I am just too old/retired to put much into it! ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 2022-03-10 11:08, David G. Pickett via gnucash-user wrote: > When I move money from an IRA or 401K account to my bank account and the tax man, that is all a taxable distribution, but GNUCash mostly sees a transfer. How do I capture the income? > On 3/10/2022 2:15 PM, Stan Brown wrote: >> The same is true of making a withdrawal from your IRA. Despite the fact >> that the tax laws treat it as income, it is not income. On 2022-03-10 14:47, Michael or Penny Novack wrote: > It is FAR more complex than that. It is NOT a "simple transfer" because > the IRA or 401K was not a simple asset. It is a "tax deferred" asset > (income you received earlier but that was (temporarily) not considered > income for tax purposes. It is becoming income NOW (when you take a > distribution) Well, yes and no. Of course, a tax liability is almost certainly created by a withdrawal from a traditional IRA. But how many people will actually book that tax liability then? David Pickett's question did not suggest a lot of sophistication about accounting, and therefore I suspect he will not want to get into accruing tax liability, but rather will record income tax as an expense when he actually pays it. (_I_ record a tax liability when I make an IRA withdrawal, but I imagine I'm in the minority on that.) -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 3/10/2022 2:15 PM, Stan Brown wrote: If you make out a check to "cash" and cash it at the bank, is that income? No, of course not. Your net worth is the same before and after cashing that check. The same is true of making a withdrawal from your IRA. Despite the fact that the tax laws treat it as income, it is not income. It is FAR more complex than that. It is NOT a "simple transfer" because the IRA or 401K was not a simple asset. It is a "tax deferred" asset (income you received earlier but that was (temporarily) not considered income for tax purposes. It is becoming income NOW (when you take a distribution) But it is more complicated than that. The 401K contributions could have been a mix of "before tax" and "after tax" contributions. Distributions from the after tax contributions is not taxed as income. You'll really have to look at the distribution statement from the plan administrator. And if the IRA is a Roth IRA, that's different too. Maybe should reconsider the 401K/IRAs/Roth IRAs kept on the books as an asset? I see this "your net worth" making the assumption the "the books" (by themselves) should always be enough. For some of us, a better picture of our total net worth might be "net worth on books" + X + Y where X, Y, etc. are things that have substantial "worth" but might be "conditional" and/or not marketable or marketable at only a fraction of their value. I treat my 401K like that BUT it's only one of the things I have to add in (or did) Michael ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
I made a subaccount under the asset in which to record the distributions. That subaccount is cleaned out each year by an adjusting transaction that moves that to the main account. That way the balance sheet year end report shows the yearly distribution amount. Makes it easy to pick off and send to the CPA. On Thu, Mar 10, 2022, 11:11 David G. Pickett via gnucash-user < gnucash-user@gnucash.org> wrote: > When I move money from an IRA or 401K account to my bank account and the > tax man, that is all a taxable distribution, but GNUCash mostly sees a > transfer. How do I capture the income? > ___ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > - > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
Re: [GNC] IRA/401K income detection
On 2022-03-10 11:08, David G. Pickett via gnucash-user wrote: > When I move money from an IRA or 401K account to my bank account and the tax > man, that is all a taxable distribution, but GNUCash mostly sees a transfer. > How do I capture the income? If you make out a check to "cash" and cash it at the bank, is that income? No, of course not. Your net worth is the same before and after cashing that check. The same is true of making a withdrawal from your IRA. Despite the fact that the tax laws treat it as income, it is not income. Please don't send the same query twice in quick succession. Wait a reasonable time before assuming the list didn't receive your email. -- Stan Brown Tehachapi, CA, USA https://BrownMath.com ___ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. - Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
