How do I book taxes that have to be paid due to capital income?

[Peter]

Hi,

How do I book taxes that have to be paid due to capital income, but will only be due in the future?

Let's take this posting as an example:

```

2021-06-18 * "" "Harvesting farmed crypto"

    Assets:Crypto:Wallet:Polygon:Ledger-X:Staking:VERT 0.675055007246049347 VERT {42.138 USD} @ 42.138 USD

    Income:Crypto:Farming:Polygon:VERT

```

This makes me 28.45 USD in capital gains. I'd probably have to pay a whopping 42% in taxes. That equals to 11.95 USD. I'd like to keep track of the amount of taxes which will be due at the end of the year—to avoid a bad surprise. How do I do that?

I tried:

```

2021-06-18 * "" "Harvesting farmed crypto"

    Assets:Crypto:Wallet:Polygon:Ledger-X:Staking:VERT 0.675055007246049347 VERT {42.138 USD} @ 42.138 USD

    Liablities:Taxes:Crypto -11.95 USD

    Income:Crypto:Farming:Polygon:VERT

```

But bean-doctor tells me that just 16.50 USD get booked into the income account. This seems wrong to me from a bookkeeping point of view, because the income is still 28.45. How do I book that correctly?

[Patrick Ruckstuhl]

Hi,

I think you're missing the expenses account for taxes. What you move to liabilities should be balanced by a tax expenses account.

Regards,
Patrick

[Peter]

Hi,

aren't expenses payable "immediately" and liabilities owed for a later time? That's why I booked it into a liabilities account, because the taxes are due at the end of the year.

[Patrick Ruckstuhl]

Hi,

Liabilities are on the same side as assets. Let me give you a couple of examples

Paying with a debit card

    Assets:MyBank               -5 CHF

    Expenses:Coffe                 5 CHF

Paying with a credit card:

2021-01-01 "" "Bought a cup of Coffee"

    Liabilities:Creditcard      -5 CHF

    Expenses:Coffee                 5 CHF

This is double book accounting, you have the Income/Expense side and you have the Asset/Liabilities side and that should always end up as zero.

Normally you want to book the expenses when they happen (e.g. when you buy the Coffee, not when you pay the credit card bill). At least that's what I do with most of it.

There are some cases where you might want to defer/spread expenses. Here I've used two different ways.

Amortizations (e.g. buying a car)

What I do here, is add the car as an asset of a certain value and each year I reduce the value of the car and book it as an expense (this is in line with my taxes, where the value of the car decreases each year)

Reserves

This is for things where I want to spread cost across multiple years (e.g. house renovations)

I have an Equity account called Equity:HouseReserves

Each month I book expenses against this Equity account (without actually moving any money around)

If I have an expense that counts against this, I book the actual movement against this Equity account instead of an expense

Regards,

Patrick

--
You received this message because you are subscribed to the Google Groups "Beancount" group.
To unsubscribe from this group and stop receiving emails from it, send an email to beancount+...@googlegroups.com.
To view this discussion on the web visit https://groups.google.com/d/msgid/beancount/7c641723-0a4b-462c-a1fe-238c4ca1cc90n%40googlegroups.com.

[Matt Hellige]

On Sat, Jun 19, 2021 at 9:36 AM Peter <tobias....@gmail.com> wrote:

Hi,

aren't expenses payable "immediately" and liabilities owed for a later time? That's why I booked it into a liabilities account, because the taxes are due at the end of the year.

Liabilities can be payable immediately or at a later time. The expense occurs whenever the unconditional obligation to pay is created. So in the case of capital gains tax, the expense occurs whenever you sell the asset and realize the gains. It's true that you don't usually need to pay the taxes until the end of the year, but that's what the liability represents. When you eventually pay the taxes, no new expense occurs, it just reduces both your cash and the liability at the same time.

So I would do:

2021-06-18 * "" "Harvesting farmed crypto"

    Assets:Crypto:Wallet:Polygon:Ledger-X:Staking:VERT 0.675055007246049347 VERT {42.138 USD} @ 42.138 USD

    Liabilities:Taxes:Crypto -11.95 USD

    Expenses:Taxes:Crypto     11.95 USD

    Income:Crypto:Farming:Polygon:VERT

And then at the end of the year when you pay your taxes:

2022-04-15 * "Uncle Sam" "Paid taxes"

    Assets:Cash              -11.95 USD

    Liabilities:Taxes:Crypto  11.95 USD

Of course, when you file your tax return, you might find out that the tax liability disappears some other way, e.g., it nets out with other tax you've overpaid and you actually get back a refund, etc.

But anyway the essential point is that under the usual rules of accounting, the expense is recorded at the moment that the obligation is created, not necessarily when the actual transfer of funds occurs.

Matt

 

pat...@ch.tario.org schrieb am Samstag, 19. Juni 2021 um 13:26:04 UTC+2:

Hi,

I think you're missing the expenses account for taxes. What you move to liabilities should be balanced by a tax expenses account.

Regards,
Patrick

On June 19, 2021 12:57:20 PM GMT+02:00, Peter <tobias....@gmail.com> wrote:

Hi,

How do I book taxes that have to be paid due to capital income, but will only be due in the future?

Let's take this posting as an example:

```

2021-06-18 * "" "Harvesting farmed crypto"

    Assets:Crypto:Wallet:Polygon:Ledger-X:Staking:VERT 0.675055007246049347 VERT {42.138 USD} @ 42.138 USD

    Income:Crypto:Farming:Polygon:VERT

```

This makes me 28.45 USD in capital gains. I'd probably have to pay a whopping 42% in taxes. That equals to 11.95 USD. I'd like to keep track of the amount of taxes which will be due at the end of the year—to avoid a bad surprise. How do I do that?

I tried:

```

2021-06-18 * "" "Harvesting farmed crypto"

    Assets:Crypto:Wallet:Polygon:Ledger-X:Staking:VERT 0.675055007246049347 VERT {42.138 USD} @ 42.138 USD

    Liablities:Taxes:Crypto -11.95 USD

    Income:Crypto:Farming:Polygon:VERT

```

But bean-doctor tells me that just 16.50 USD get booked into the income account. This seems wrong to me from a bookkeeping point of view, because the income is still 28.45. How do I book that correctly?

--