[GNC] Recommended Method of Entry for IRA Distributions

[Milton Stern]

Hi Everyone,

I was thinking, perhaps to have the initial 401k/IRA in the "Assets" as a
Deferred Income under the standard categories/subcategories (ex. Stocks,
Mutual Funds, Treasury Bills, CDs, etc.) (or Visa versa)?
When a distribution is taken, the vehicle is sold with proceeds going to
"Income" (perhaps to a sub-account descriptive of the vehicle and the
category?
Then a transfer of income to a bank-type account from the income account?
(Though it may not meet accounting standards, it should be able to track
the 401k/IRA and produce an income and asset reports.)
(Note that this does not directly address vesting, withholding nor
premature distributions.)

Thoughts?

Moshe




> Message: 8

Date: Fri, 13 Jan 2023 17:10:35 -0500
> From: Michael or Penny Novack <stepbystepfarm at comcast.net>
> To: R Losey <rlosey at gmail.com>, "David T." <sunfish62 at yahoo.com>
> Cc: gnucash-user at gnucash.org
> Subject: Re: [GNC] Recommended Method of Entry for IRA Distributions
> Message-ID: <378e51c5-61d1-4c7f-18c8-1db8c6a837f0 at comcast.net>
> Content-Type: text/plain; charset=UTF-8; format=flowed
> On 1/13/2023 11:48 AM, R Losey wrote:
> > Thanks. The only minor drawback is that I seem to be entering the data
> > twice under "Income" just to keep track of IRA distributions?on their
> > own. But hey, it's one way to make it work.
> >
> > And, as has been pointed out, since this is not really "income", it
> > makes sense that the transaction has no net income. I think I'll adopt
> > this method for 2023.
> >
> > In hindsight, since the Fiduciary Trust that keeps the IRA has to
> > report to me on distributions, I haven't felt a need to have an
> > account for this and to double-check them.
> >
> >
> >
> > On Thu, Jan 12, 2023 at 10:56 PM David T. <sunfish62 at yahoo.com> wrote:
> >
> >     Two separate entries. In my mind, this would best be put in one
> >     transaction, to make the association obvious.
> >
> >     CR - Assets: IRA $1000
> >     DB - Assets: Checking $1000
> >     DB - Income: Deferred Income $1000
> >     CR - Income: IRA Distribution $1000 *
> >
> <<< it most certainly COULD be in one entry. A transaction can have more
> than two accounts. It is only when entering via the shortcut "enter
> directly into the ledger" that gnucash allows you to do that is limited
> to two accounts. When entering a "split" in "journal mode" you can have
> more than two. In the old days ALL transactions were entered first in
> the journal and then posted to the ledger. But even in pen and ink days
> we had SOME shortcut possibilities, like "cashbook accounting" << where
> a small subset of the ledger allowed direct entry skipping the journal.>>
>
>
BUT -- I would not have "deferred income" under income, because it is
more like a standing account. The money that you put into the 401k/IRA
did not get counted in your income in those years. The money contributed
by your employer (401k) did not get counted as income back then, nor the
annual increases in fund value as you perhaps marked to market at year
end (the investment income of the fund).

When you take distributions later is when it becomes income << you are
undeferring that amount >>

This is accounting, not gnucash

Michael D Novack


>
>     * Income: IRA Distribution is used to document the distribution
>     for tax purposes.
>
>     David T.
>     On Jan 13, 2023, at 7:21 AM, R Losey <rlosey at gmail.com> wrote:
>
>         Thanks for all of the information... however, getting back to the
original
>         question, I'm not sure how to record IRA taxable distributions. I
thought I
>         was doing it, but I am apparently not.
>
>         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).
>