Taxes: expense or liability?

Wesley wsheldahl@qx.net
Fri, 05 Jan 2001 23:12:10 -0500


Hi,

I've been using GnuCash for my personal finances for just a few months
now, and have a question about how to handle taxes.

I initially set up my chart of accounts based on the example in the
online manual, so the taxes look something like:

Liabilities
----Taxes
--------Federal
--------State
etc.

Now that I'm looking at year-end reports and net worth, I wonder why
they aren't treated like an expense?  Example:

Expenses
----Taxes
--------Federal
--------State
etc.

Once I pay the tax through paycheck withholding or whatever else, it's
gone, as opposed to charging something to a credit card, which I need to
pay later.  If I do get a tax refund, I would think that would be
treated like a rebate to the expense account, just like if the electric
company gave me a rebate check because I overpaid or something.  The
only situation I can think of where this would be a liability, is for
businesses that pay quarterly sales tax, but incur tax liability with
every retail sale.  In that case, they may want to track how much
they'll need to pay later.  But me, I'm going on a cash basis, not
accrual, so it doesn't make sense.  Can someone help me out here?

Thanks,

-- 
Wes Sheldahl
wsheldahl@qx.net