On 2005-02-12, Dick Watson <littlegreengecko[at]mind-enufalready-spring.com> wrote:
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I used the same data, line 62 and the "Estimated taxes" line from
TE. What I did was divide te/tt. In my method 100% = perfect.
Using your method, I'd get 125%. That is TE estimates 125% more
than my actual tax liability.

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Correct.

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Correct.

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I'm not talking about EITC. I'm talking about Child Tax Credit:

http://www.irs.gov/taxtopics/tc606.html

OT: As far as promoting social behavior, you will get no argument
from me for tax reform. One of the suggestions I like is:

http://www.techcentralstation.com/092903A.html

In the mean time, as long the credit is available, I'm not going
to turn it down.

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Thank you for the help.

I think you stumbled onto the only thing I could recommend: compare TEs
performance with the way taxes are actually figured to see where it's
getting its data and what it does with it. How you code things and have
categories setup and so forth may mesh or clash with it. It also doesn't
model everything--as both of us have identified. All of these things can be
tweaked, either in the manual tweaks in TE or by rejiggering your data
collection/coding/category setup.

BTW, when you say "TEs tax liability for 2004 is 225% of TaxCut's liability"
I wondered for a moment if we calculate the error using comparable data
points. I did:

tt=1400 Total Tax, line 62
te=Money Tax Estimator with the "Estimated taxes" value from the Tax
Estimator Summary page

(tt-te)/tt

225% calculated using total tax has it missing by more than a factor of two.
Your child credits must amount to more than half of your line 45 liability.
We're past earning this one--it must be a Great Deal. Tax about tax policy
promoting a specific "social" behavior.

I don't see the Child Credit in the list on the credits page. I'm betting TE
doesn't model it for whatever reason including possible sloth on the Money
team's part. (BTW, this does seem like it's a huge enough player that while
I know they aren't going to code a full tax package in TE, this should be
one they deal with.) But now that you've calibrated TE to your taxes and
identified its reasons for variance, you can put in the correction--as I
have to do with cap loss carryover--and get better results.

"Mark Horn" <mark[at]hornclan.com> wrote in message
news:slrnd0rvuf.rep.mark[at]home.hornclan.com...
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On 2005-02-12, Mark Horn <mark[at]hornclan.com> wrote:
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Well, this turns out to be wrong. I decided to go with my plan B.
But where I remember entering a scheduled deposit into the register
causing the budget to change, it didn't this time. Perhaps my
memory of this is incorrect.

So after entering the details, I have a variance against my budget.
Oh well. Maybe I can finally get TE to be more accurate.

On 2005-02-12, Mark Horn <mark[at]hornclan.com> wrote:
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I figured at least one enormous part of why TE is so grossly
inaccurate for me. It didn't give me my child tax credits, even
though I've told it how many dependants I have. When I manually
add that into other credits, TE's accuracy becomes only 102.27%
of TaxCut's liability (100% = perfect).

I'd like to get all of the numbers correctly entered in the
transactions instead of having to tweak the TE numbers. I'd like
for Money to calculate those numbers accurately so that I can
rely on its estimations, knowing that there are a limited number
of manual tweaks that I'm forced to add (e.g. child tax credit).
If I can get to that point, then I can start to rely on TE more.

BTW, I had to enter my child tax credit into other credits. If I entered
it into the Child & Dependant care credit area, it only gave me 20%
of the credit. The remaining 80% showed up as non-refundable credit,
which is not accurate.

I'd be curious to know if anyone else with children is seeing TE
ignore or miscalculate these credits.

On 2005-02-12, Dick Watson <littlegreengecko[at]mind-enufalready-spring.com> wrote:
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TEs tax liability for 2004 is 225% of TaxCut's liability.

I know that 401(k) is something that you had to tweak to get
TE to work properly for you. I haven't gone back and done that
retrospectively for 2004 (although it's set up that way for 2005).
Are there any other things that you've figured out are really
critical?

Any tips for a systematic way to figure out why it's so wrong?
The numbers that I've entered into TE are directly from my 1040
and it's still this far off.

To make a withholding projection (or similar) I've typically resorted to a
little bit of Excel/MoneyLink work. Use MoneyLink to get YTD transactions,
use DB functions to get YTD totals from the transactions and things like
number of paychecks already accounted for, then use spreadsheet math to
figure out number remaining paychecks times withholding+YTD=projected total
for year. Your way undoubtedly gains ease and rapidity vs. accuracy and
vagaries that BP can throw in. OTOH, I have several similar spreadsheets I
have annually recycled for many years now with only minor tweaks year to
year. The original NRE investment for the Excel development was high, but
now I get the accuracy for close to no new time invested.

You did set me to wondering: how well did TE do for me last year? First, I
will grant that TEs number is now all based on transactions and not
scheduled transaction projections and there's only one hand number in it;
cap loss carryover. Result: TEs estimated liability for last year is 0.79%
away from our actual Form 1040 tax liability. I'm actually shocked it was
this good.

There are 10^9 reasons why your mileage **will** vary.

"Mark Horn" <mark[at]hornclan.com> wrote in message
news:slrnd0r88j.pgk.mark[at]home.hornclan.com...
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I don't know that I've ever calibrated all of the ways that scheduled
transactions get reflected into/updated into BP. Just the fact that they are
there by definition put me off so far that I really don't spend a lot of
time messing with BP. (I do check occasionally what it tells me I'm spending
more or less on than the budget.) And the notion that converting a
scheduled, hence de facto budgeted, item into a transaction and changing the
actual amount along the way should change my budget ex post facto sends
shivers up my spine. It just defeats any reasonable sense of how I think
(may not apply to anyone else and clearly does not apply to Money team) BP
should work.

The reason for the "wedge" scheduled transaction, in my mind, is a lot more
for cash flow planning/forecasting (and TE) than for BP, but it should also
serve that purpose as well. I just use the extra scheduled--but never
actually entered by itself--transaction because of the limitations on
editing specific occurrences. (E.g., only in next 12, once one is edited,
base can't be changed.)

Does that make more sense?

"Mark Horn" <mark[at]hornclan.com> wrote in message
news:slrnd0r81a.pgk.mark[at]home.hornclan.com...
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On 2005-02-11, Dick Watson <littlegreengecko[at]mind-enufalready-spring.com> wrote:
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I know that you've done a lot of tweaking to get Tax Estimator to
be accurate. But I've never succeeded at getting it anywhere close.
All I'm trying to project out is how much I'm scheduled to pay in
taxes by the end of the year. My actual tax liability is calculated
using TaxCut. TE is usually overly pessimistic by several thousand
dollars.

On 2005-02-11, Dick Watson <littlegreengecko[at]mind-enufalready-spring.com> wrote:
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Hmm... I occasionally have a paycheck that is slightly off what I
expect it to be. For some reason, every other month or so, one of
the tax line items will be off by $0.01. What I do, is I go in and make
the change as I'm entering the paycheck into the register.

This change has always been picked up by the budget. In other
words, the budget doesn't see a variance when I make the change as
I'm entering it into the register. On the other hand, if I enter
the paycheck as it is in B&D and then go back and edit the register
entry, the budget will show a varience of $0.01.

Is this different from your experience? Because if I want to avoid
the variance, I don't think I need the wedge account.

Or am I confused?

My thought would be that using BP to project your taxes for the year is like
looking in your rear view mirror to decide if the light you are sitting at
just turned green. Tax Estimator is not great--and you have to be diligent
about validating what it is doing with which pieces of your data--but it
seems much more likely to give a decent answer than anything BP can do no
matter how you treat the bonus. TE knows rates and deductions and cap gains
and dividends and so forth. BP only knows your scheduled withholding which
may have little to do with your actual tax liability.

As to the Budget vs. the Bonus: it's a thoroughly understandable variance.
The budget, at best, provides a baseline plan to compare to actual
performance and provide insight into variances that need to be understood.
This is one you understand.

If you don't want the same annual variance next year or just want better
cash flow projection and are lucky enough to believe you might get one next
year, here's my technique: schedule an annual (around bonus time) paycheck
that reflect JUST the deltas from your regular check for your guesstimate of
bonus income and taxes and any deducts you incur tied to the bonus. When
that time rolls around, skip the "wedge" transaction occurrence and update
the regular paycheck as you enter it into the register. (My wife's employer
does the bonus thing. Mine tells me I should consider myself d*** lucky to
even have a job and be thankful they pay me for working for them besides.)
You can even have the wedge transaction transfer the net from the AT tab to
savings--thus a $0 paycheck total deposited in your regular deposit account.
This hides the money from Cash Flow for your checking account. This maybe
keeps you from spending it before you get it and makes it easier to save it
when you do.

(Note also that the high marginal rate of taxes on the bonus derives
directly from the IRS pubs that tell employers how to withhold regular and
irregular amounts. I had to go understand this once. The withholding on
regular salary reflects the tax rate. On marginal income--like a bonus--it
reflects the marginal tax rate. I don't remember the pub #, but it's all out
there somewhere.)

"Mark Horn" <mark[at]hornclan.com> wrote in message
news:slrnd0q9eo.n6h.mark[at]home.hornclan.com...
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On 2005-02-11, A J Gladson <oilcantony[at]yahoo.com> wrote:
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Thank you, and thank you to John DeMastri.

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Right. But the problem is that the budget is now out of whack for
the tax expenses. Which means that if I want to project what my
tax expenses are for the year, I have to remember the difference
and then manually add the correct number in.

I think I'm going to do what I planned on doing. That way the
computer can do the math for me to figure project out how much my
taxes will be.

Thanks for the tips.

Also congrats on the bonus.

I do not budget for bonus as the amount can vary from year to year (in
this year it will be almost 10% higher then last-great year for the
company). I don't worry about the Budget being out of balance for an
income item so much as I focus on the expenses. Even if I do use the
budget to pay some bills (like this year), I again don't worry about
the budget being out of wack because I am reducing items much faster
then planned.

One other option is to use last years bonus as an estimate for this
year and guess how you plan to spend-invest-save it. Thats the purpose
of a budget IMHO.

Hi Mark -

Congrats on the bonus. The way I handle it is as an extra annual scheduled
paycheck deposit, so there's a placeholder for it once I get the actual
numbers.

YMMV, but I've set up my budget to be the regular monthly expenses that can
be anticipated. If I pay down debt, or buy something with the bonus $$, it
truly is extra-budget, so I don't want the bonus messing with that. Anyway,
as long as you're consistent, and understand what you're looking at, either
way is as good as the other, in my opinion.

Actually, that statement probably applies to 70% of the questions on this
ng...

- John

"Mark Horn" <mark[at]hornclan.com> wrote in message
news:slrnd0phs7.l1t.mark[at]home.hornclan.com...
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I received a small bonus this year from my employer. The way that
this appears to get handled is that it's added into my upcoming
regular paycheck as a line item under earnings... and then taxed
beyond belief. The marginal tax rate is almost 40%!

Anyway, is there a consensus on the best way to handle this? I knew
I was going to get a bonus in December when I set my budget, but
I didn't know what it would be. If I'd known the amount at that
time (and the tax costs), I would have placed it in the budget,
but I didn't so I couldn't.

I can think of two ways to handle this:

A) I take my regular paycheck from Bills & Deposits and enter it
into the register as is. Then I modify the register entry to
reflect the actual amounts. This will have the impact of leaving
my budgeted income and taxes alone and raising my actual income
and taxes so that I'm over budget in both cases.

B) I take my regular paycheck from B&D, but when I enter it into
the register, I modify the single entry so that it reflects this
particular paycheck. This will have the impact of increasing my
budgeted income and taxes to match my actual income and taxes,
so that I'm on budget in both cases.

My leaning is towards B because I knew that this was coming even
if I didn't know what the actual numbers would be. Questions:

1) Is there some disadvantage to choosing B that I'm missing?
2) Is there some better option (besides A & B) that I haven't
thought of? If so, what are it's benefits?

Thanks in advance.