On Thu, Jul 3, 2014 at 8:46 AM, Martin Blais <[email protected]> wrote: > > You don't need these postings: > > 2014-01-01 * MyCo Paycheck > ... > Assets:Prepaid Tax:Income:Federal $400.00 > Liabilities:Tax:Income:Federal $-400.00 > ... > > Assets:Prepaid Tax:Income:Ca $300.00 > Liabilities:Tax:Income:Ca $-300.00 > > Those look incorrect to me. These won't work to calculate the tax you have > to pay in the future, which depends not on your contributions, but on the > amount of "distributions" when you take the money out, if we're talking > about pre-tax money (the amount of which hopefully will have grown > substantially at that point).
Ah, ok so they are set up to basically cancel each other out over the course of the year, but after Dec, when I calculate my actual taxes due, I adjust Liabilities:Tax:Income:Ca to reflect the actual tax due. I was giving this as an example of liability that adjust the net worth calculation. I'd expect to add a different account, also under Liabilities:Tax:[...] to reflect est. tax due on a distribution. >> The pivot report show that I'd have a $100.00 >> cost basis in the 401k, and that everything else >> (employer basic, employer match, pre-tax), plus >> whatever gains made in excess of $400.00 due >> to changes in the stocks, have a liability equal >> to some appropriate tax rate. > > > Again, that's incorrect, once the investments grow, your "liability" amounts > will all be wrong. I guess it wasn't clear, I'm trying to work out how to calculate those liability amounts after the investments grow. That was the whole point of my asking if anyone had already figured out whether or not they could use off-the-shelf capabilities in ledger. :) > As for the after-tax amounts, what I'd do if I were you is hold that in a > separate account from the pre-tax amounts. They're probably separate "real > world" accounts anyway, aren't they? (I'm curious, I haven't use after-tax > 401k contributions yet, but I doubt they fold them into the same 401k > account.) No, they are all folded into the same account. It's irritating as all heck, but that's the way it is (at least across 2 mgmt companies I've dealt with). If it turns out that both pre-tax and after-tax money can be held in a > single real-world account - again, I'd really like to know how this works - > you could just create two subaccounts. Some companies, like TIAA-CREF will helpfully break down each portion of a purchase into pre-tax, employer, employer-match, and post-tax. Other companies, like Fidelity, won't. This lack of information is why I'd prefer to just compute the total cost basis (as in my example w/ the pivot report), and track that against the net value of the account as it grows. In other words, the net value of the account minus the cost basis is what I will owe taxes on eventually. > Just to be clear: when you say "tax due" here, you mean, taxes to be paid on > distributions, right? Yep. > Ha... I think you just gave me a fun idea! I'll write a plugin in Beancount > that automatically adds a "future tax expense" entry to offset pre-tax money > for the balance sheet, e.g. if I have a 401k account with a value of say > 100,000 USD in it, it would automatically insert an entry at the latest day > like this: > > 2014-07-03 F "Taxes to be paid on distributions." > Expenses:Taxes:Federal 27000 USD > Expenses:Taxes:StateNY 8000 USD > Liabilities:FutureTaxesOnDistirbutiosn -35000 USD > > This would make the balance sheet reflect only post-tax money, and thus be > more meaningful. I think you're talking about exactly what I was thinking about. A more accurate net worth calculation becomes possible once you are estimating the future tax liability on an account's growth. > Which brings up another question: for a Roth IRA, one is able to obtain a > tax-free distribution up to the amount of its contributions way before > retirement (http://en.wikipedia.org/wiki/Roth_IRA#Advantages: "Direct > contributions to a Roth IRA (principal) may be withdrawn tax and penalty > free at any time"). This means that during the life of this Roth IRA > account, you have to keep track of the total amount of (contributions - > distributions taken). I'm not sure how I would go about doing that, I would > probably use a fake commodity, like I do for IRA and RRSP contributions, > e.g. add parallel legs that add ROTH units to a asset account whenever I > make a contribution and debit from these ROTH units if I take a distribution > of principal. Is anyone here doing this? How do you track your contributions > to it? The Roth IRA is completely tax free. The growth is not taxed. Same with Roth 401(k) contributions. Deductible contributions to a Traditional IRA are taxed on distribution, same as any growth. Non-deductable contributions to a Traditional IRA work the way you describe above. Whatever non-deductible contributions you made are considered your cost basis, and only the growth is considered taxable (this is effectively the same scenario I'm describing regarding a 401(k) or 403(b)). Of course, I don't know why anybody would ever make non-deductible contributions to a Traditional IRA after the IRS made the changes in 2010 allowing people to convert to a Roth regardless of income levels. Jim -- --- You received this message because you are subscribed to the Google Groups "Ledger" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/d/optout.
