Budgeting & Quarterly Taxes

I'm new to YNAB and am in my first month. I own a small business and pay estimated quarterly taxes of around $1000/month. Since they are due quarterly, in one month I will have $3000 come due. So, I have a budget setup to save $1000/month. When I pay the $3000, I need to categorize it, but it double counts if I place it in the tax savings category. Anyone have any insight on this? Am I missing something obvious? 

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  • Being my first month, I also have no idea how budget categories accumulate overspending or underspending over time. Perhaps the answer is to connect my tax savings account (which currently is not linked) so I can just transfer the $1000 between accounts and not actually show it in the budget as spent until I pay taxes. Still interested in any help on this topic. 

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  • Yes, you need to put that account on budget, so that you can give the dollars in that account jobs. The $3000 doesn't double-count. You budget $1000, and you have $1000 set aside. You budget another $1000 the next month, and you have $2000 set aside. And so on. When you pay the taxes, your $3000 goes to zero. 

    YNAB is an electronic version of the cash envelope system. It often helps to imagine it as really being cold, hard, cash that you are sorting into paper envelopes, and your categories as being paper envelopes out of which you remove the cash you need to spend.

    Reply Like 3
      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 1 yr ago
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      And an addition: If you are used to budgeting by account, which it sounds like you are, the mindset shift is actually quite easy if you'll let it be. Your categories now perform the functions your separate accounts used to perform. Just like you used to mind your account balances to determine how much you had available to spend on what, you'll mind your category balances. And just as you used to move money into separate accounts to watch it build up, now you'll do that by adding money to your categories. It's the same exact process, and has the added benefit that you can create categories to set aside money for things you'd never open a whole different account for (for me when I started, it was haircuts, which I couldn't afford to pay for all at once and needed to save up week by week, but there was no way I was opening a savings account to set aside $40 every six weeks.)

      Reply Like 2
  • Thanks. I think this helps. I do accounting for my business and set budgets based on category needs. Since I haven't moved into a second month on YNAB, I haven't seen whether a prior month's category surplus rolls over. I'll get the other savings accounts moved in and maybe that'll solve it for me. Thanks!

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      Baileys Brew 

      Baileys Brew said:
      Since I haven't moved into a second month on YNAB, I haven't seen whether a prior month's category surplus rolls over.

       Money added to a category will stay in that category until you spend it or move it to another category.

      However, when you move money to an account that is not part of your budget, the money leaves your budget, so YNAB will treat that just like any other spending where the money leaves your budget. That's why it's best practice to keep all accounts in which you are saving and spending on budget.

      It also simplifies cashflowing, since most people aren't going to spend money directly out of a savings account.

      Reply Like 2
    • nolesrule Yes, I believe this is the current problem. There is a technical issue trying to connect my other savings accounts which I have not had time to resolve. Thanks!

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    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 1 yr ago
    • Reported - view

    It doesn't double count because you budget $1000 to your budgeted column and then the -$3000 goes in your transactions column and makes the balance zero.

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  • But is is currently deducting the $1000 (thus evening out the budget for that month) when I transfer it to savings, since my savings isn't connected to YNAB (technical issue). 

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  • You account doesn't NEED to be connected.  That is why there are manual transactions.  Connected is a bonus.  Like you, some of my accounts won't connect today.  I have submitted a trouble ticket and support is working on it, like they have for the past 3 weeks.  YNAB doesn't have all the kinks worked out in the direct import from financial institutions.  It doesn't slow me down as I manually input transactions, the auto connect is nice but not necessary.  

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    • TheTabby
    • Just a common cat trying to budget uncommonly well.
    • TheTabby
    • 1 yr ago
    • 2
    • Reported - view

    I'm not sure if you're aware, but you can add an account to YNAB without the link in place so you can budget the money in those accounts.  You just have to enter each transaction manually.  I would suggest just put in a "starting balance" of whatever it was on 1/1, and then record the transactions since then.

    Oops, what TryingToGetAhead said.

    Reply Like 2
  • As the others said, add the accounts manually. You can always try to connect them later.

    Since they are savings accounts there won't be a lot of transactions, and most will be transfers between accounts, probably to your checking account, which I assume is connecting, since you haven't said anything about that one.

    Reply Like 1
  • Ok, one last tangential question while I have your attention. Starting out in January with YNAB (this is my first month), I am budgeting $1000 per month to reach a $3000 quarterly tax payment. Should I simply not categorize my first tax payment (which was due Jan 15) in which I didn't budget for since i was not a YNAB user for Q4 in 2017? If I add this to my tax category, it starts out my account negative, and I'll never dig out. My inclination is to basically ignore that first payment and start fresh.

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      • WordTenor
      • Arranged the menu, the venue, the seating.
      • WordTenor
      • 1 yr ago
      • 2
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      Baileys Brew Record what really happened. If you started YNAB before 1/15 and paid the taxes, then you need to record the taxes as being paid from wherever they were paid.  If the account you paid them from is an on budget account, then you will need to budget for them first. 

       Have you taken a getting started class yet? It will help you grasp the fundamentals. It sounds like you're still trying to run a traditional budget where you input all your bills  whether you have the money to pay them or not, rather than allocating cash which is what "budgeting" means in YNAB. 

      Reply Like 2
  • I have this similar issue.

    I save / put aside $1700 / month for a Prop tax payment I will have in December.  I transfer that money to another account that is unlinked.  This part is ok because as YNAB sees the transfer, I categorize it as Prop Tax.  YEAH!   

    HOWEVER, at the end of the year I will transfer the full amount back.  YNAB will treat it as income (it is not), then when I write the check for the taxes, it will double count this expense  (one time for all the transfers, and now for this check payment).

    How can I avoid this double 'expense' from appearing in my history?

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      • jenmas
      • jenmas
      • 1 yr ago
      • 2
      • Reported - view

      GreenBack Hoarder the simplest thing would be to add the other account to YNAB. That way you can transfer funds monthly from checking to savings and the still see the money in your property tax category and then at the end of the year transfer the money back to your checking account and make the payment.

      Reply Like 2
    • jenmas Thanks for the reply!  I actually thought about your solution, but I don't want to link this account because I don't want to 'assign' these dollars.   

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      • jenmas
      • jenmas
      • 1 yr ago
      • 2
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      GreenBack Hoarder You need to do what makes the most sense for your budget, but to interrogate your thinking - why not? Just because you allocate them to a category doesn't mean you can't change your mind. And buy doing so, you might be able to identify that you don't have as much "saved" as you think you do. Or conversely, that you've saved too much and it might make sense to up 401(k) contributions or start some taxable investing. 

      I have all savings, checking, CD, money markets, and wallet as on budget accounts (none of which are linked for direct import - I am 100% manual entry and have been since 2014). I also don't have a general "Emergency Fund" - I have a 6-month net expenses replacement category, a home repair category, a car repair category, a medical annual out of pocket max category, etc. When I'm doing consulting work I have a quarterly tax set aside category.

      Reply Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      GreenBack Hoarder

      This is the problem with keeping an account off-budget to store money that will ultimately be spent by another account You put in the category, and then you spend it to move it to the off-budget savings account. And then you un-spend it to get it back in your checking account. And then you spend it again to actually spend it.

      But what happens if you have enough money in your checking account to make the property tax payment and you decide not to move the money out of savings because it is earning more interest? Now all of a sudden your grocery money is in the savings account instead of your property tax money. How are you gonna reconcile that?

      So yes, you do want to assign those dollars. You want them assigned to your Property tax category and any other category that you have earmarked the money for.

      This is one of the biggest hangups that new YNAB users have, and I suggest they rip off the band-aid and just put all cash accounts in their budget so they can let the budget manage their savings.

      In YNAB, you save money by budgeting to a category and then NOT spending in. When the account is on budget, the location of the money doesn't matter. Being in a category in YNAB is what reserves it for its purpose.

      Read: The Relationship Between Your Budget & Your Accounts: It’s Complicated

      Reply Like 2
  • jenmas nolesrule  - Man, yall are rockstars.  Thanks for the quick thoughts, feedback and ideas.  I do like YNAB (used only for 6 days now), but I feel it lacks maximizing the value of your money.  Like you mentioned, moving it for a higher interest reasons OR floating the money on a CC for points / cashback etc, but you pay it off each month.  YNAB seems like its really for cash only / debit users as other Use Cases aren't easy to solve for in the tool.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      GreenBack Hoarder A bunch of us optimize. But that only works if you have all your accounts as part of the budget. Then it doesn't matter what account your money is in and you just move money to the right account at spending time if it doesn't have enough in it. I keep my checking, 2 savings accounts (at different banks), all credit cards (statement balance always paid on or just before the due date), Treasury Direct and a bunch of CDs (16 currently at a bunch of banks) in my budget. I move money wherever I want to get the best return (and based on taking early withdrawal restrictions into consideration).

      The only place that might cause issues is carrying a zero percent balance on a credit card. and figuring out the payoff tracking.

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      • jenmas
      • jenmas
      • 1 yr ago
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      GreenBack Hoarder Like nolesrule I optimize my credit card usage and interest accumulation in savings accounts. You cannot look at the balance of Savings Account #1 and say "this balance includes home repair, bi-annual car registration, and new car in 10 years" while Savings Account #2 is Loss of Income. No grouping of categories matches the balance of any of my 22 on budget accounts - multiple checking, savings, CD, credit card and straight up cash - (well, maybe they do, but not on purpose). My category balances exist in all accounts simultaneously. All I have to do is make sure there is enough money in the account that sends out bill pays on the day that the bills are due. 

      Also I don't float anything on my credit card. I can pay any credit card balance in full on any day of the week - I just choose to wait until the credit card companies present me with a proper invoice and then I still wait until close to the due date in order to maximize the time that my cash sits in an interest bearing account.

      Reply Like 1
  • I found it was easiest to link my tax savings account, but not my general savings accounts for our family or kids. That way I could create categories to budget for the transfers to family/kid savings. The tax one was more complicated since it involved payments back out for taxes, so it was easier to connect that one. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      Baileys Brew Depends on your budget. If it's the family budget and it includes the taxes and family savings, both should be on. If it's the business buget, it should only be the business accounts. I always suggest avoiding mixing business and personal budgets and spending.

      I don't include any kid accounts in my budget because when we put money in their accounts it's as good as gone. It's not part of our budget anymore.

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    • nolesrule I budget for saving the money, if that makes sense. As you note, the money that goes to the kids accounts is a one way street, so I like to budget that $X goes into Kid #1 savings. Since this YNAB mantra is give every dollar a job, I need to have those dollars in my budget to make sure they get saved. If I have a linked savings account, I can't budget for it.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 1
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      Baileys Brew Yes, I was agreeing with you. Although "linked" (as in "linked" with the bank for auto-import) can be either on-budget or off-budget (tracking). You might want to work on the terminology so everyone understands eachother.

      As I said, my kids savings accounts are not in YNAB at all. we budget for the money we put in it, and then the transfer is like spending it. Poof. Gone. Not coming back to the budget.

      We also do not include their accounts as assets for our net worth calculation. We do not have them in our budgets as tracking accounts either. They have their own budgets with all of their accounts, though only their cash is part of their budgets. We want them to know about their other assets, but also realize they are not part of their budget and are for long-term future use.

      Reply Like 1
  • Thanks for the clarification. Yes, the terminology is important. 

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