[GNC] IRA/401K income detection

[D.]

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 <stepbystepfarm at comcast.net>
Sent: Wed Mar 16 19:10:50 EDT 2022
To: gnucash-user at 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


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