I absolutely agree with you that using a dummy account doesn't "feel
right"... when I have situations that I don't fully understand, I run into
that a lot.
I can think of three options:
1) Make no changes and quash the "doesn't feel right" feeling
2) Consider that in reality, you are just transferring money from one
account to another account, and so, there really isn't "income" in the
actual sense of the word. If you choose to go this route, your RMD will be
a split transaction with the money going straight into checking, federal
tax, and state tax: you won't use the income account and won't need the
dummy account
3) If, however, you want to record the distributions for tax purposes, then
consider: The contributions to your accounts were deferred income; when you
withdraw from the retirement account, you are decreasing that deferred
income. (as a side issue, when your retirement accounts pay dividends or
interest, how do you record them? I record them as "Equity:Deferred
Income:Dividends")
So, supposed I take a distribution of $1300 from my traditional IRA, with
$200 withheld for federal tax and $100 withheld for state tax (note: I just
made up the tax amounts to make the math easier - they are not intended to
reflect reality)
The transaction would look like
Traditional IRA: withdraw (credit) $1300
Federal Tax withheld: increase (debit) $200
State Tax withheld: increase (debit) $100
Checking account: increase (debit) $1000
Equity:Deferred Income: decrease (debit) $1300
Income:Taxable:IRA Distribution:Traditional IRA: increase (credit)
$1300
Under taxable income, I have a sub-account under "IRA Distrubtion" for each
account from which I take a taxable distribution -- because it makes my
taxes easier to estimate before I get the official documents. You could
just enter every withdrawal as an "IRA Distribtion". But since I pay
quarterly estimated taxes, I want to keep a close check on the tax
situation.
As you can see, you are very close with your "dummy account" approach.
I hope that this helps.
On Fri, Dec 27, 2024 at 10:37 AM Bob Plantz <rgpla...@outlook.com> wrote:
> It's a traditional IRA. I also have a 403(b). I'm taking required minimum
> distributions from both.
>
> I have an asset account and a "dummy" account for each. When I take an
> RMD, I create an income transaction that shows where the money goes:
> checking account, federal withholding, and state withholding. Then I create
> a withdrawal in the asset I'm taking the RMD from and deposit that
> withdrawal in the corresponding dummy account.
>
> This hack seems to work, but it doesn't feel right to me because it seems
> to violate the double-entry principle.
>
> ________________________________
> From: Stan Brown (using GC 4.14) <stan...@fastmail.fm>
> Sent: Friday, December 27, 2024 8:13 AM
> To: Brad Morrison <bradmorri...@sonic.net>; rgpla...@outlook.com <
> rgpla...@outlook.com>
> Cc: gnucash-u...@lists.gnucash.org <gnucash-u...@lists.gnucash.org>
> Subject: Re: [GNC] How to treat IRA distribution as income
>
> On 2024-12-27 00:35, Brad Morrison wrote:
> >
> > This may seem basic, but is your IRA
> > (
> https://na01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FIndividual_retirement_account&data=05%7C02%7C%7C68a362b3cb0f4e2f12af08dd26916130%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C638709128013877626%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=%2FhC5VDKIUzCuCUqnOWZ5goI3WTek4GABrgJhLpnljc8%3D&reserved=0
> <https://en.wikipedia.org/wiki/Individual_retirement_account>)
> > traditional or Roth?
> >
> > IRAs can be taxed at the contribution stage or at the withdrawal stage.
>
> Or both. If you ever made nondeductible contributions to your
> traditional IRA, part of each distribution will be taxable and part will
> be nontaxable.
>
> If you withdraw too soon from your Roth IRA, part of the withdrawal may
> be taxable, and there may be penalties as well.
>
> See Publication 590-B for detailed rules on both of these:
>
> https://na01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.irs.gov%2Fforms-pubs%2Fabout-publication-590-b&data=05%7C02%7C%7C68a362b3cb0f4e2f12af08dd26916130%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C638709128013896351%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=DoXCqvWVE2cRrIJerRNNZd5us%2B7n1gz2q4lGMHb1cCE%3D&reserved=0
> <https://www.irs.gov/forms-pubs/about-publication-590-b>
>
> Stan Brown
> Tehachapi, CA, USA
>
> https://na01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbrownmath.com%2F&data=05%7C02%7C%7C68a362b3cb0f4e2f12af08dd26916130%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C638709128013910691%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=UvUEJwPyu59MC89EO%2FVSk2W%2B1QnVHFQl4bxja7UN17U%3D&reserved=0
> <https://brownmath.com/>
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_________________________________
Richard Losey
rlo...@gmail.com
Micah 6:8
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