Is Income Tax withholding an Asset or an Expense ??

[Derek Atkins]

Hi,

As an _employer_ the income tax you withold is a liability (because it
is money you have but you owe to the govt).  Then it gets transfered
to an 'expense' when you pay it to the gov't monthly, quarterly, or
yearly.

As an employee, you could treat the tax withheld as an asset and then
transfer to an expense (or back to Bank) when you file your taxes.
However, I think most people just consider the income-tax withheld as
an expense and file it there directly, mostly because it's a lot
easier to think about it this way, and not everyone gets a tax refund
regularly.

You may consider talking to an accountant about more complicated means
to setup your accounts if you really want to look at it this way.

-derek

David <dcorking at yahoo.fr> writes:

> My salary (and some other income) has US and State income taxes
> withheld.
> 
> This year I want to set up my gnucash accounts to show my gross salary
> and the deductions.  But it seems to make sense to show my income tax
> liability as a liability, and the tax withholdings as an asset
> (deducted from the paycheck to a Tax Prepaid 2003 asset account.)
> 
> Any estimated tax payments would go into the same Tax Prepaid 2003 account.
> 
> Then when I do my tax return the asset account would transfer to the
> tax liability account, with the surplus coming back into my bank
> account, hopefully as a refund check (or an extra payment to the government.)
> 
> I didn't see a tree like this idea in the examples.
> 
> So am I in fantasyland?  Are most of you (in the US) putting
> withholdings, estimated tax and refunds in an expense account?
> 
> Will my suggestion get me in an overcomplicated mess at the end of the
> year?  Can I get just as much information (for reconciliation at tax
> time), and will it be less trouble, if tax is always an expense?
> 
> Look forward to reading your experiences and suggestions (apols if
> this is obvious, I couldn't find a discussion of this topic when
> googling the list archive, and I am afraid find reconciling refunds,
> estimated tax and penalties a real pain by hand.)
> 
> David
> 
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-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       warlord at MIT.EDU                        PGP key available