[GNC] How to treat IRA distribution as income

[Stan Brown (using GC 4.14)]

On 2024-12-26 20:30, Bob Plantz wrote:
> I realize that an IRA distribution is not income, but the (USA) IRS treats it as income.

Not always. If you have a basis in your IRA, because at some time
(possibly decades ago) you made a nondeductible contribution, or rolled
over some other account that contained some after-tax money into your
IRA, then you will have to compute how much of each distribution is
taxable and how much is not.

> How do I get gnucash to treat the total cash distribution as income?
In my view, the question is not "how?" but "why?" Just because the IRS
calls it income doesn't mean you need to account for it as income in
GnuCash.(*) And, as mentioned above, some of it may not even _be_ income
for tax purposes. GnuCash doesn't fill in your Form 1040 for you, so
where is the need to credit an income account when you take a distribution?

Sherlock suggested a way you might account for distributions from your
IRA. I won't say that's wrong, if it works for you. My own approach is
simple: an IRA distribution is the same thing as a withdrawal from a
savings account: a debit to the checking account and a credit to the
savings account or the IRA. (If you're having taxes withheld, it would
be a debit to income tax, a debit to the checking account, and a credit
to the IRA.) If you use the same distinctive Description line in every
withdrawal, it's easy to do a Find in the Asset account at the end of
the year and add up the withdrawals. (Your broker should be sending you
a 1099-B with that total, but of course you'll want to check the
broker's figures.)

(*) There's an even better example of the futility of trying to make
your GnuCash income equal your taxable income. Consider Social Security
benefits. Some portion of them is not income, but is a return of FICA
tax you paid while working. And some _different_ portion of the benefits
may be taxable on your Form 1040. You won't know how much of your Social
Security benefit is taxable till the end of the year, so how would you
allocate each month's payment between income and non-income?

Stan Brown
Tehachapi, CA, USA
https://BrownMath.com