How to Enter a Tax Refund (or Payment) When Tracking Money
It’s already several months into the calendar year, but you just received the tax refund (or had to pay) for the income you earned last year. How should you enter it when tracking your money?
I’m not an accountant, but I have considered two main choices that work practically: backdate to the previous year or enter it now.
Either system should be fine so long as you are consistent. You’ll either backdate every year or you’ll enter it at the same time period (say, March or April) every year. I’m not sure which timing is better, so I’ll just say what I use.
I enter tax activity as it happens. While it might not technically be appropriate to credit taxes this year because I overpaid (or underpaid) last year, it is a suitable system. It helps me keep track of money as I get it.
The most important part is to enter the item the same way every year.
Example of What I do
In the simple expense tracker I made, this is how to record a hypothetical $300 tax refund.
Notice that the refund is a negative number since it’s a credit. In other words, it is a “negative expense.”
If you want to learn more about why to track expenses, read this introductory article.
If you want to download a free spreadsheet to track expenses, visit the Financial Tools page.
Carnivals
Two of my recent articles appear in carnivals. These collections of articles are very interesting–I spent a good hour surfing through these articles. I encourage you to check them out:
2 Responses to “How to Enter a Tax Refund (or Payment) When Tracking Money”
Clever, I’ve just downloaded and started filling in the tracker and was wondering how to fill in my interest earned on accounts - this will do the job!
Also, can I convert the spreadsheet to £’s? I’m using it in google docs.
By Emma on Aug 28, 2008
Emma:
Excellent. I think you can do other currencies.
Here’s how I did it in google docs. Highlight the cells which have the currency format you want to change. Click on the button “format” and look for the format with that involves a dollar sign or other currency symbol. Then look for “more currencies” and click on £ or any thing else you want.
By Presh Talwalkar on Aug 28, 2008