[GNC] IRA/401K income detection

[Michael or Penny Novack]

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 <enter>  
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 >>