Personal Income vs Personal Expense for Federal Tax
I know you can setup categories any way you see fit but I am trying to get an idea of what others do.
When I was receiving a paycheck I had a Salary category with Federal Taxes listed as a subcategory under Personal Income heading. I would enter the tax as a negative so the bottom line of the check would be the net income being received.
Now that I am no longer receiving a paycheck, would it be wise to create a category under Personal Expenses (vs Personal Income) for the Federal Taxes?
Best Answers
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Frankly you should have always had a Federal Tax Expense Category. You don't say what sort of Category you were using for the paycheck - maybe some sort of "negative" income or something? - but the long and the short of it was that the Federal Tax represented a true expense to you irrespective of how you previously coded it.
You're going to continue to pay Federal Taxes in retirement I'd expect, either through withholding from some sort of pension - Social Security, company pension, IRA withdrawals, etc. - or by paying Estimated Taxes quarterly. (Or maybe both.) However it's done you will need a Federal Tax Category to properly account for the money.
My spouse and I are retired and pay taxes exclusively as Estimated Taxes and/or via payments (refunds) on the income tax return. My Federal Tax Category is set up this way:
If you largely pay taxes in retirement through withholding, you could simply make that "Estimates" subcategory into "withholding."
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Frankly, I would have done it that way previously. That said, yes, I would set up Federal Taxes as a Personal Expense.
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Thanks for the info!
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Answers
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Frankly you should have always had a Federal Tax Expense Category. You don't say what sort of Category you were using for the paycheck - maybe some sort of "negative" income or something? - but the long and the short of it was that the Federal Tax represented a true expense to you irrespective of how you previously coded it.
You're going to continue to pay Federal Taxes in retirement I'd expect, either through withholding from some sort of pension - Social Security, company pension, IRA withdrawals, etc. - or by paying Estimated Taxes quarterly. (Or maybe both.) However it's done you will need a Federal Tax Category to properly account for the money.
My spouse and I are retired and pay taxes exclusively as Estimated Taxes and/or via payments (refunds) on the income tax return. My Federal Tax Category is set up this way:
If you largely pay taxes in retirement through withholding, you could simply make that "Estimates" subcategory into "withholding."
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Frankly, I would have done it that way previously. That said, yes, I would set up Federal Taxes as a Personal Expense.
0 -
Thanks for the info!
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