[GNC] How to record Personal income tax ?

[Finbar Mahon]

Strike me that a sub category to the entry for 'expenses taxes' would do 
the trick? Cumulated, it should be enough if you calculate based on 
previous years?

Personally, I dump money every so often into a savings a/c and take it 
back out to pay the robbers

Downside is that the rate of return is so bad it is hardly worth the effort.

On 20/03/2020 00:23, David Cousens wrote:
> Long,
> Most personal income tax in many jurisdictions is based on a concept of
> taxable income - i.e income sources which are subject to tax  and specific
> expenses ( usually on the basis that they are incurred in earning that
> income) which are able to be deducted from that income to provide a nett
> income which is assessed for tax payable. What income is taxable and what
> deductions are allowable will depend upon your local taxation legislation
> for which you will need professional advice.
>
> To be able to track and make provision so you have the money available when
> taxes are due you will need to partition your income,i.e. have separate sub
> accounts  for income subject to taxation and income which is not. Similarly
> with expenses you need to establish subaccounts for expense categories which
> can be legitimately and legally deducted from your taxable income and those
> which can't.  the difference between your income subject to tax and
> deductible expense sub account totals will then give you an estimate of the
> taxable income against which you will be assessed. How accurate this will be
> will depend on how accurate your partitioning of income and expenses is and
> what other processes may affect your tax paid ( often rebates and tax
> offsets for specific purposes.
>
> Accountants usually create specific liability account to identify future
> expenses that may be accruing like taxation. You may also want to set aside
> money in a separate bank account specifically to pay you taxes when they
> come due or you may want to keep the money in your bank account and just be
> aweare that you have sufficient funds available to cover the taxes when they
> become due. If you want to do this on a regular basis, e.g. monthly, you
> will have to use the taxable income for the previous month and calculate the
> tax you will expect to pay on the taxable income for that month.
> Transactions similar to the following will achieve that:
>                                                           Dr
> Cr
> Asset:Bank:Checking                                               xx
> Asset:Bank:TaxProvision                      xx
> Liability:Provision for Income Tax                              xx
> Expense:Provision for Income Tax        xx
>
> where xx is the amount of tax you have calculated is due for that month. If
> you do not want to keep the funds in a separate account just delete the
> first two splits in the above transaction. The expense account would have to
> fall under the non tax deductible sub-account.
>
> At the end of the year when your tax is actually calculated and assessed you
> would make adjustments to the liability  and expense accounts  (and also
> transfer to or from a specific asset account if you are using it) to reflect
> any differences from your estimates during the year and then clear the
> liability when you actually pay your tax  (debit the liability by the amount
> paid and credit either your check account or a specific asset  account you
> have created for the tax provision).
>
> This is just an outline of a general approach to deal with taxation accrual
> as your income is accrued. It would have to be adjusted to suit your
> specific circumstances and taxation legislation (and local accounting
> practice) so consult your accountant for that. Details of how to calculate
> the tax similarly depend on your specific tax laws.
>
> David Cousens
>
>
>
> -----
> David Cousens
> --
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