[GNC] Tax deferred account transfers suggestion

[John Ralls]

> On Apr 2, 2021, at 1:02 PM, Michael or Penny Novack <stepbystepfarm at 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