after tax withholdings that are then returned....how to handle

ImacAttack
ImacAttack Member ✭✭

My wife is a teacher who is technically paid for 10 months out of the year but her district allows her the option of receiving 12 monthly checks by way of withholding a portion of her AFTER tax income from each of the first 10 months and then distributing that to her on months 11 and 12.

How would one go about setting the transactions up within Quicken to accurately reflect cashflow and "income".

Instictiveily, I've set up a category called "net pay deferral" which matches her pay stub category name one to one. And just like her her monthly pay roll, for each month I list a deduction. Then, when she receives a that amount in month 11, I enter that amount as a deposit. Mathematically it all makes sense…but the problem is I can't figure out how to accurately reflect this as cashflow. ie — because the category of Net Pay Deferral is defined as an Expense category, it inherenly shows up as an expense in the report. Even the credit back on months 11 and 12 show as credits within expense when in fact this is net income. I've thought about creating a new category call Net Pay that is an Income category, and categorizing those deposits that way but then it looks as though she's gotten paid more than she actually has (because shes listed gross income and then listed net income for two months, but that income has already been held back).

Hope this all makes sense. Wondering if any other teachers have encountered this and/or any others have ideas.

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Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta

    Instead of making your Net Pay Deferral a category, I would make it a separate asset account. That is, instead of using the category for New Pay Deferral, do a transfer to s similarly-named account. then when month 11 rolls around and she receives the accrued net pay, recor5d the deposit to your checking account and instead of a category, make this a transfer from the Net Pay Deferral account; this will increase the balance in your checking account and decrease the balance of the asset account. After month 12's paycheck arrives, your asset account should be back down to zero if you've done everything right.

    (I use this same approach when I spend money for work that I'll be reimbursed for. I have a work expenses asset account, so when I spend the money, it's a transfer to the asset account; when I get reimbursed from work, the deposit in my checking account reduces the asset account.)

    Quicken Mac Subscription • Quicken user since 1993
  • ImacAttack
    ImacAttack Member ✭✭

    Thanks, Ive thought of this approach as well but hadnt put it to practice. Will give it some more thought.

  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    edited August 19

    I'd use the Asset approach also. That deferred amount IS money that you own … you just haven't received it yet.

    BUT, having said that, I'd also not go with this deferral at all. I'd rather have the money in MY accounts, under my control and earning interest at my bank, that letting the school hold onto it.

    The only downside to this approach is if you don't think you could refrain from spending it until months 11 & 12.

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

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