[moneydance] Tax accounts

[Edward Reid]

At 14:24 08/31/08 +0200, Simon B wrote:
>So essentially my Liability account is the tax office, and when the 
>account is negative I owe them money. When it comes to actually pay them, 
>I transfer money from my tax holdings account to the Liability account.

This will work. A slightly more complex method which tracks the real world 
better is this:

Tax Escrow (the bank account that you call tax holdings)
Tax Liability (a liability account representing what you expect to pay in 
taxes)
Future Taxes (a category closely linked to Tax Liability)
Tax Office (a category, the destination of actual tax payments)

When you make an estimate of a new tax liability of amount x dollars (I'll 
use dollars for the purposes of discussion), transfer x dollars from your 
regular bank account to Tax Escrow, and transfer the same amount from Tax 
Liability to Future Taxes (in other words, pay from Tax Liability to 
category Future Taxes).

When you make a true tax payment, make the real payment from your bank 
account to the tax office, record the payment in MD from Tax Escrow to Tax 
Office, and make a transfer from Future Taxes to Tax Liability to zero out 
Tax Liability.

Assuming the tax payment is only due at the end of the year (or whatever 
taxation period), this represents the real world better because it only 
shows transfers to Tax Office when you actually make a payment, while it 
also shows the liability as you calculate it.

I won't say one is better than the other -- one is simpler, the other 
corresponds better to the real world. Both advantages are significant. 
Choose which is better for you.

Edward
-- 
Art works by Melynda Reid: http://paleo.org