"Double Dating" transactions?

[Aaron Gaudio]

On Mon, 2004-08-30 at 16:36 -1100, Bill Wisse wrote:
> Hi Dale
> 
> On Monday 30 August 2004 15:09, Dale Alspach wrote:
> > I think this has been discussed previously. With the usual advice to call
> > accountant if you really need to know how to do it right, I would put this
> > on an accrual basis.
> 
> Some small businesses like myself have no accountant.

Keep in mind that (in the US, at least), some businesses are required to
use an accrual basis. If you are incorporated, the odds of this being
required go up.

> 
> > As soon as you know that you are overpaying on your 
> > tax withholding, you can start making transaction into an accounts
> > receivable. Thus if you knew during 03 that you were overpaying the
> > government $30 per month, you can make a transaction to credit the tax
> > expense account $30 and debit the accounts receivable asset account. When
> > the refund check arrives you credit accounts receivable and debit checking
> > (or whatever). This will have the effect of giving you two different dates.
> 
> How would you know if you are overpaying withholding tax?

If you are a business, you may have to pay quarterly (or even monthly)
estimated tax payments. Presumably in this case, you would pay exactly
what you think you owe, and then would not be overpaying.

> You normally find out at the end of the financial year.
> 

Alternatively, if you want to simplify and are not bound by generally-
accepted accounting principles (for instance, if this is all going onto
your 1040, not corporate statements), you don't need to have monthly
transactions to the tax refund for overpayments: you could make one
transaction for the entire sum of the refund on Dec 31 of the year your
refund is for. However, this will skew your periodic tax payments so
that it looks like you are spending more in taxes than you really are,
until December when it looks like you get a huge payback on them.

> I was the one who posted a message  "tax refund" on the list.
> I got some suggestions how to deal with it but it still doesn't seem right.
> On the one hand you'll have an asset: The Refund Money.
> But would other account would I use?

You would either use your tax expense account(s), or for each tax
payment (coming from income, for instance), create a transaction split
going to both your tax expense account (for the amount of tax owed) and
to your tax refund account receivable (for the amount of overpayment).

> I created a "Tax Refund 2003" account under the tax header, but this tax 
> header, by itself, gives me a wrong figure because it takes away the refunded 
> tax from the tax I already paid.

If you put this under Expenses, as an expense account, then this is not
correct. Tax overpayment is not an expense, it is an account receivable
because the gov't owes you that money back, making it an asset.

> Maybe the best thing to do is leave it in a "suspend account " IAW bank it 
> into your cheque account and use suspend account as the other account and deal 
> with it properly later on.
> 

This is pretty much what an Account Receivable (and it's opposite,
Account Payable) is.