On 2022-12-18 19:20, Fred Tydeman wrote: > For a USA person, when I move cash from a regular IRA (tax deferred > account) to a Roth IRA (tax free account), besides the movement of the > cash, I need to also somehow show that the cash moved is considered > income. What should be the other side of the income pair?
Fred, I agree with Michael that this is an accounting question, not a GnuCash question. I'm not a tax professional, but being retired I've had occasion to research the rules about IRAs so that I can estimate my taxes. Therefore ... It's income as far as the IRS is concerned, but it's not income in any accounting sense. You don't own any more money or assets after the rollover than you did before. In your place, I would record this and only this: DR: Assets:Roth IRA $x CR: Assets:Traditional IRA $x (same amount) Do you just ignore the tax liability on the rollover, for GnuCash purposes? Maybe. It depends on whether you're accruing your taxes or recording them only when paid or refunded. I accrue, but I suspect that I'm in the minority as far as personal finance is concerned. A spreadsheet estimates my tax, and at the end of every month I make these entries: DR: Expenses:Income Taxes CR: Liabilities:Federal Income Tax DR: Expenses:Income Taxes CR: Liabilities:California Income Tax The withdrawal from the traditional IRA would show up on my tax spreadsheet, so this month I'd be accruing larger-than-usual amounts of tax, but the _structure_ of the entries would be what it always is. What if you don't accrue your income taxes, just account for them when they are paid? Right now, you would record only the withdrawal from the traditional IRA and investment in the Roth IRA. When you actually pay your income tax, you would account for it in the same way you always have. The number will just be higher this year because of the rollover being taxable, but again the _structure_ of the entries will be what it is every year. P.S. Be careful about estimated taxes. Depending on the size of your rollover and the context of the rest of your tax return, the tax you have incurred from the rollover might be big enough that you need to make an estimated payment by January 15th. See Form 2210 to determine whether that's necessary and how much you must pay early. Especially if you made the rollover late in the year, you may want to use the annualization method on Form 2210 to eliminate or reduce the penalty. 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 ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
