On Thu, Jul 3, 2014 at 12:04 PM, James A. Robinson <[email protected]> wrote:
> 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. > Hmmm I see, just an example. >> 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. :) > Right. I don't think it does that. Also, personally I don't like to bake estimations manually in transactions, like this. I think this is information that should be derived from the balances computed by the command-line bookkeeping system. > 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). > Crazy indeed... do they at least track it for you? In other words... is anyone counting, or is the government just trusting that you're going to be reporting the right numbers? > > 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. > For the record, Vanguard does break down the pre-tax employee contribution and employer-match, though I don't see the point: both are pre-tax money. 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. > BTW, I think you're overloading the word "cost basis" here, it's confusing. It's confusing because if the account is able to hold both pre-tax and after-tax contributions, the terms cost basis doesn't bear much resemblance to the cost basis of an investment (it would, it all you had is after-tax contributions in there). What you mean is counting the amount of after-tax contributions to the account that you should not have to pay tax on when you take a distribution, even in the presence of pre-tax contributions. Let's call it, say, the "pre-tax basis" and the "after-tax basis". > 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)). > Right, this is also what I understand. What I'm suggesting above is a method to keep track of the "after-tax basis" that lives in your account, that is, the sum total of all non-deductible contributions you made in the past (what you called the "cost basis"). You would add legs with another "commodity", say "AFTERTAX" or "ROTH" or whatever you prefer to call it, something like this: 2014-01-01 * MyCo Paycheck ... Income:Prepaid Tax:Income:Federal -400.00 AFTERTAX Assets:401k:MyCo 400.00 AFTERTAX The sum of all "AFTERTAX" units will tell you how much money you can get a non-taxable distribution of. If you do take a distribution, you have to remember to also add matching and appropriate legs to it: 2014-01-01 * MyCo Paycheck Assets:401k:MyCo $-2100.00 Assets:Bank:Checking $2100.00 Assets:401k:MyCo -2100.00 AFTERTAX Expenses:Distributions 2100.00 AFTERTAX This works: Assets:401k:MyCo's AFTERTAX units count how much of that account is after-tax basis Income:Prepaid Tax:Income:Federal counts the total of your after-tax contributions made during the exercise period Expenses:Distributions's AFTERTAX units tells you how much after-tax distributions you receives during the exercise period On Thu, Jul 3, 2014 at 12:27 PM, James A. Robinson <[email protected]> wrote: > On Thu, Jul 3, 2014 at 9:04 AM, James A. Robinson <[email protected]> > wrote: > >> 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). > > So the full quote from the snippet you got from Wikipedia is: > > Direct contributions to a Roth IRA (principal) may be withdrawn > tax and penalty free at any time.[1] Earnings may be withdrawn > tax and penalty free after 5 years if the condition of age 59½ (or > other qualifying condition) is also met. Rollover, converted (before > age 59½) contributions held in a Roth IRA may be withdrawn tax > and penalty free after 5 years. Distributions from a Roth IRA do > not increase Adjusted Gross Income. This differs from a traditional > IRA where all withdrawals are taxed as Ordinary Income, and a penalty > applies for withdrawals before age 59½ > > So that first sentence is simply discussing the difference between > a Roth IRA and a Traditional IRA when it comes to *early* withdrawal > of funds. > Yes, I know, but you need to track how much you're able to take out this way. Same as the method I suggest above. -- --- 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.
