[GNC] Recommended Method of Entry for IRA Distributions

[R Losey]

Sorry about "category" versus "account" -- I still, after 7 years, have
Quicken habits... but I would argue that many people see an "account" as
something that has both debits and credits (like a bank account), as
opposed to "categories", which, for the most part, only have credits or
debits (like "Groceries" or "Salary"). I do know that they are actually
accounts, and I like that.

While this may not be "Income" in the accounting sense, it is income in the
practical sense... but of course you are correct that the net worth isn't
changing; it's just a transfer of assets, like paying off a credit card or
making a house payment.


On Thu, Jan 12, 2023 at 11:09 PM Stan Brown <the_stan_brown at fastmail.fm>
wrote:

> On 2023-01-12 20:19, R Losey wrote:
> > Let me write through a couple of cases.  In the first one, I'm selling
> > $1000 worth (10 shares) of security A and having it go directly to my
> > checking account with no income tax withholding. (some of these may be
> > USA-centric terms; I apologize for that).
> >
> > If I can create a "Sell" transaction that sells 10 shares at $1000; the
> > other entry would be to increase my taxable distribution category by
> $1000.
> > But what next? My checking account doesn't have the $1000 increase, but
> > then what is the "other" category to use for that transaction??
>
> Please forget the notion of "category". Some accounting packages have
> that, but it seems to be basically a confusing synonym for "expense-type
> account" and maybe "income-type account).
>
> GnuCash has _accounts_. You have an asset-type account for your checking
> account, and another asset0type account for your security(ies).
>
> When you sell shares for cash, you increase the balance in your checking
> account and decrease the balance in your security account, like this:
>
> Debit (left-hand number column) to Assets:Checking Account
> Credit (right-hand column) to Assets:Security(ies).
>
> Taxable distribution is not an account, and the distribution is _not_
> _income_. Your net worth is the same after the sale and distribution as
> it was before the sale.
>
> Yes,I know that the amount of an IRA distribution must be reported as
> taxable income on your form 1040, but in an accounting sense it is not
> income.
>
> And speaking of distributions, did you miss the note I posted at 11:33
> this morning (Pacific time)? I really don't know why you have no choice
> about having withholding taken from an IRA distribution. You can
> _choose_ to do it, or you can file estimated taxes, or maybe your income
> is low enough that you don't even need to do that. But -- unless the
> money is going outside the United States -- you have a _choice_ about
> whether to have withholding. I gave citations and quotes from the IRS
> website.
>
> Stan Brown
> Tehachapi, CA, USA
> https://BrownMath.com
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-- 
_________________________________
Richard Losey
rlosey at gmail.com
Micah 6:8