[GNC] How to record Personal income tax ?

[Michael or Penny Novack]

On 3/19/2020 5:07 PM, Long wrote:
> Hello,
>
> So, Forget my question, Think in easier ways. What should i do in gnucash?
> when from January to June, my income is 3000 each month, and i will pay 1800
> at june. (It's mean 10% of my total income: 18.000).
> I want to know that, my income is 3000$, and there is 300$ i need to hold
> EACH MONTH to pay at june.
> That behaviour like i did when i pay tax.
>
> Thank in advance for help me.
> Regards.


With the warning that I am NOT "qualified" to give this advice.

I will describe in terms of debits and credits.

a) You create an account under Liabilities "income tax owed" and one 
under expenses "estimated income tax"

b) So each month when that $3000 comes in you debit "cash" $3000, credit 
"income" $3000, debit "estimated income tax" $300 and credit "income tax 
owed" $300   < you are recording the 20% > You will also want an expense 
account for the ACTUAL amount eventually sent in. We'll discuss that later.

c) So in June, if you send in to the IRS that expected amount of $1800 
it is simple. You debit the liability $1800 and credit cash the same 
amount, and transfer that amount from estimated to actual. That's easy 
BUT might not be what happens. You might actually pay a different 
amount. In that case an adjusting transaction debiting the liability and 
crediting "estimated" for the amount your accountant/tax advisor told 
you you didn't have to pay.

Note that NONE of this is a "how to do in gnucash" question but a "what 
should I be doing" question independent of whether or not you were using 
gnucash. You either have to learn basic accounting or have a 
professional tell you what to do, using gnucash does not change that.

Michael D Novack