Is Income Tax withholding an Asset or an Expense ??

[Ian Pilcher]

David wrote:
> 
> 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.)
> 

IANAA, but I believe that this is a perfectly valid approach, as long as
you also record your estimated tax expense and a corresponding
liability -- netting everything out when you file your taxes.

With this approach, your tax expense total during the year will be based
on your estimate, rather than the amount that has been withheld, and you
will have both a Taxes Withheld (asset) and Taxes Owed (liability)
account.

I'm sure that most people simply debit the withheld amount directly to
the expense, and adjust the expense when they file their taxes.  I know
that this is the approach that I take.

Either approach will yield the same results when you actually file your
taxes.  They will only produce significantly different midyear expense
and net worth results if your estimate of the tax expense is quite a bit
different from the amount withheld.  Your suggested approach will,
however, increase both assets and liabilities during the year.

-- 
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Ian Pilcher                                           pilchman at attbi.com
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