unofficial microsoft.public.money FAQ and A
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Q) How do I treat my income tax refund/bill for the prior year?
A) There are several different ways to treat this.
Probably the "best" way to handle this with the least side effects is one suggested by Chris Cowles: If you don't already have one, create a "bank" account (it doesn't have to be associated with any bank) for money owed to you. Flag it as a 'budget' account on the details page. Record a transaction increasing (or decreasing) the balance on that account, categorized to your income tax expense category, dated 12/31/[tax year in question]. That adjusts your income tax expenses to reflect reality. When you get the refund, record the deposit as a transfer to checking from the asset account. Alternately, when you pay the bill, record this as a transfer from checking to the asset account, payable to the taxman or woman, as you prefer. Either way, this transaction is budget-neutral.
You can also use/create categories for this that are flagged to not be included in tax reporting (federal prior year due or refunded) or are flagged to be included (state prior year due or refunded). These would be categories like Taxes:Federal Income Tax (prior year) or Taxes:State Income Tax (prior year). This has the downside of artificially reducing or increasing your tax expenses in the tax year in question. This can have budget planner complications.
Please see this disclaimer if you are using Money 2005 or this comment if you are using Money 2006.
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Last update: 10 December 2006 |
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