Income v. Expense Report BUG?

aadams1278aadams1278 Posts: 14Member
edited July 2012 in Desktop
I've noticed that the income v. expense report shows the income under the month it was actually earned rather than the following month which it is budgeted for. this completely throws off the income v. expense concept to determine if you spent more than you earned in that month. I would think that since the YNAB method is so heavily encouraging using last month's income, that this report would reflect your selection of income for this month vs. next month correctly.

example. I got a check for 1000 in january, it's set up as "income for February". During february I spent 900. In February I only earned 800 and set it for "income for March". On the income v. expense report it shows that January income was 1000, February income was 800 and expense was 900, equaling an overspending of 100. This is not correct because during february I was using the 1000 income from january's check. so it should show february as 1000 - 900 = 100 savings.

If this isn't a bug then i'm pretty confused as to why it would be set up that way
Post edited by Unknown User on

Comments

  • INAB26INAB26 Posts: 1,556Member, Beta Tester
    I believe it's set up that way because that particular report is often used for tax reporting purposes. Unfortunately the govt. doesn't understand about buffers :wink: .
  • aadams1278aadams1278 Posts: 14Member
    just because the govt doesn't do it that way doesn't mean i shouldn't be able to view the report that way for my own personal use. If you're using the buffer, then that report is essentially just showing arbitrary numbers that don't really mean anything since they're offset by a month.
  • DavidGDavidG Posts: 71Member
    IMHO it's an income expense report so it should accurately record all of the income and expenses for a given month. Which it does.

    New YNAB reporting is cool. +1 beer to all of the team
    snapfooBozeman42
  • smallLifesmallLife Posts: 325Member
    Actually, can someone explain to me what the "tax purposes" are? I understand that taxes are something you don't mess with and if it genuinely helps people do their taxes I'll get over it. I've only done my taxes a couple of times, but I've never had to know what monthly income and expenditures were. Just yearly figures. But even if I did income would be from W-2s and 1099s and then if I needed itemized spending it wouldn't matter which income month YNAB looked at because spending would never have an alternate month.

    I've mentioned this aspect of the reports before, but his example of how it throws things off was much simpler than mine :-)

    But seriously, can anyone explain the tax purposes for individuals and families?
  • los lobos marinoslos lobos marinos Posts: 567Member, Beta Tester
    smallLife wrote:
    Actually, can someone explain to me what the "tax purposes" are?
    You can only offset 'allowed' expenses against income that cover a set period of time. You can't submit expenses that are budgeted for in the future as no money has actually been spent. It could open an individual up to (successful) prosecution for fraud if they innocently changed their minds about the exact amount they actually spent from their future budget, or in this case the 'buffer'.

    Basically, only income for the tax year less applicable expenses actually spent for the same tax year are relevant for tax purposes. Expected income and expenses outside the tax year are irrelevant and, if included, can potentially cause legal problems.

    I do not really use the report features in YNAB, but I would hate YNAB to change this report to show current income v future expected expenses for the next month (or further for some people) as YNAB users could get themselves into all kinds of problems which would be BAD.
  • smallLifesmallLife Posts: 325Member
    I do not really use the report features in YNAB, but I would hate YNAB to change this report to show current income v future expected expenses for the next month (or further for some people) as YNAB users could get themselves into all kinds of problems which would be BAD.

    This was not what I was saying at all. I was saying, as was the OP, that for those with a buffer the more accurate depiction of Income vs. Expenses is "Budgeted in July" vs. "Spent in July" not "Income Earned in June" vs."Spend in July". Future expected expenses has nothing to do with it.

    Does that change what you were saying about fraud? I agree that expected income and expenses are irrelevant. In either scenario, a budget report or an income report, the expenses are stagnant. What I can't understand is how having either a separate report or a drop down option on the I/E report for "Budgeted This Month" affects the usability of the report for taxes.
  • los lobos marinoslos lobos marinos Posts: 567Member, Beta Tester
    smallLife wrote:
    I do not really use the report features in YNAB, but I would hate YNAB to change this report to show current income v future expected expenses for the next month (or further for some people) as YNAB users could get themselves into all kinds of problems which would be BAD.

    This was not what I was saying at all. I was saying, as was the OP, that for those with a buffer the more accurate depiction of Income vs. Expenses is "Budgeted in July" vs. "Spent in July" not "Income Earned in June" vs."Spend in July".
    Are you saying that if my paycheck was $4,000 per month (total annual $48,000) but only budgeted $3,500 per month (total annual $42,000) that I should only submit $42,000 as income for the year? Sorry if I'm misunderstanding you but that appears to be what you are saying.

    If someone was under-budgeting their income for whatever reason and they submitted their total budget for the tax year instead of received income then the amount would be less than their actual income. That would, in my opinion, satisfy the legal definition of fraud.

    It really doesn't matter what people have budgeted for, or for what month. It's only income received during the current tax year less applicable expenses spent for the current tax year that are relevant.
  • smallLifesmallLife Posts: 325Member
    Are you saying that if my paycheck was $4,000 per month (total annual $48,000) but only budgeted $3,500 per month (total annual $42,000) that I should only submit $42,000 as income for the year? Sorry if I'm misunderstanding you but that appears to be what you are saying.

    No, I'm speaking more about people who have variable wages. For example, I'm an hourly employee with two jobs. My first job is fairly consistent but can vary each month because of overtime or holidays. This is what I use to send to my buffer and is my baseline budget. In addition, I have a second job that I use as disposable 'extra' income in the month I earn it.

    So for July, I budget based off of June's income from the first job and July's income from the second. Thus the more accurate "Income" v. "Expense" report is based on which month the income is budgeted to rather than when it was earned. If I was salaried it would be a moot point, but my income can be $1950 one month and $2500 the next. That $550 can make a big difference when looking at the Income and Expense report.

    I would of course report all income for taxes, I'm not seeing how you're getting that from my statement. To clarify, what I mean by "Budget in July" is "Available to Budget in July". In essence I'm saying that last month's income is better compared with this month's expenses for those with a full buffer. The income/budgeted line is variable with different situations but I believe the budgeted amount is a more accurate picture when dealing with pie graphs and trends.
  • los lobos marinoslos lobos marinos Posts: 567Member, Beta Tester
    Okay thanks. Easy to misunderstand on these forums as you have to read between the lines if the background has not been mentioned. Just to confirm (as my last post may have read the wrong way), I wasn't accusing you of committing fraud but was just pointing out a potential problem.

    Even though you appear to fully understand what it is you want from the reports, how the tax system works and how to interrogate/understand the figures that are presented by YNAB, there are some users who may not.

    I believe YNABs primary function is to support users to manage budgets and is not intended for users to calculate their taxes. Even though this is the case, I think, it is just the nature of things that some users will choose to also use it as a tool for their tax calculations. There will be a small but significant number within that group who really have no understanding of how the tax system is administered in their country. Those people could unintentionally submit fraudulent tax accounts if they misinterpret a budget v spent report and miscaclulate their accounts. It is for this reason that I believe YNAB should keep things as they are for now.

    It may be in the future that YNAB adds further functionality in this regard. If they do, then maybe it should only be released as an additional "Personal Taxation Expansion Pack' that clearly separates out the different functions of budgeting and taxation to avoid potential problems for their users. But for now, to promote social responsibility, I believe the status quo should remain.
  • JoelJoel Posts: 9,738Member, Beta Tester, Beta Moderator
    This report is modeled after an Income Statement or Profit and Loss Statement. Using Rule 4, and having a buffer doesn't change the fact you still receive income in the month you receive it.

    I do have a complaint about this report, as I would like to just see yearly totals (or have the ability to collapse each month) because a huge list of monthly columns does absolutely nothing for me. Income Statements are yearly totals as well.
    VanillaCottage
  • aadams1278aadams1278 Posts: 14Member
    Another method to workaround this issue and get the results that myself and small life would like to see (expenses paired with income designated for that month) is on the budget page. If you have the column header expanded (where it shows "available to budget" amounts) you can compare the "income for Jun" and the "Outflows" for that month below. It's not ideal since those numbers aren't directly next to each other, and doesn't show the breakdown of each category, but the overall income vs expense is all i'm concerned with.

    I would like to see this area rearranged in such a way that these numbers can be displayed next to one another. In my opinion, that would pretty much make the income vs. expense report obsolete because I could compare monthly total income vs. expense with just a quick glance without having to switch screens to the reports.

    To take it even one step further and make it even that much better, I'd love to see those numbers displayed together and then a calculation of savings vs. loss when comparing the amount of money you actually MADE and SPENT versus only how much you BUDGETED and SPENT.

    then you could have displayed side by side, something like this

    Income for (Month) ___________________Income for (Month)
    -Budgeted amount_____________________-Outflows
    =Overbudget/Available to budget________=Savings/Loss

    (i had to use the underscores to separate those columns because the forum didn't properly format it when i used spaces)
    VanillaCottage
  • m8cb0ym8cb0y Posts: 78Member, Beta Tester
    I can see the accountants butting heads with the YNAB buffering folks, and I count myself in the latter.

    If I can offer a simple solution: create a separate report modeled after this one but name it something like BUFFERED INCOME vs EXPENSE and add a disclaimer to it that this report does not meet tax reporting purposes.

    This allows all of us bufferers to see the budget screen in a different light but ensures no one will misuse this report for tax purposes. While most of us will live in the Budget screen, this allows for the occasional 'post-mortem' analysis of our spending habits to determine if there are any long-term bad habits forming.
  • RodeoClownRodeoClown Posts: 4,184Member, Moderator, Administrator, YNAB Team, Beta Tester, Beta Moderator
    m8cb0y wrote:
    This... ensures no one will misuse this report for tax purposes.
    I can guarantee you someone (probably many people) will misuse this.
  • LarryinLALarryinLA Posts: 297Member
    Unfortunately, YNAB is very difficult to use for tax purposes. I say unfortunately, because I would like the program that I record all my registered transactions in to also provide reports that can summarize my income transactions. One of the reasons I moved away from my spreadsheet was that I lost track of some of our income and ended up with both a nasty tax bill (and a small amount of underpayment penalties) and found that despite earning more than I thought we would, we didn't save very much last year. YNAB has done a great job fixing problem #2. Problem #1, not so much, since YNAB works is designed to track net income, which makes it impossible to use YNAB to determine the gross income on which taxes are based. I suppose it is possible, but it seems to be an unnatural use of the software. I'm curious who would even be trying to use YNAB to support taxes. The existence of this report has made me consider using YNAB to track total income, including paycheck deductions, but I still don't think it makes sense to do so in YNAB.

    I'd really like there to be a paycheck feature that can handle tracking paycheck deductions within the buffer and category structure and some reports that can aggregate that information. Planning for taxes properly is a significant budget activity, and it is essentially invisible to YNAB's standard operating procedure. If your withholding is scheduled correctly, then you're fine, otherwise, there's a problem.
  • smallLifesmallLife Posts: 325Member
    @LarryinLA: here's a withholding calculator that you can use to see if you need to adjust your withholding. Just have a copy of your latest paycheck and fill it out. I can see your point for contractors and 1099 employees, but for people whose employers have paycheck withholding what could I gain from tracking that info in YNAB? (Although I can see tracking 401K which would have the same functionality)

    http://www.irs.gov/individuals/article/ ... 96,00.html
  • DeguelloTexDeguelloTex Posts: 3,218Member, Beta Tester
    smallLife wrote:
    @LarryinLA: here's a withholding calculator that you can use to see if you need to adjust your withholding. Just have a copy of your latest paycheck and fill it out. I can see your point for contractors and 1099 employees, but for people whose employers have paycheck withholding what could I gain from tracking that info in YNAB? (Although I can see tracking 401K which would have the same functionality)

    http://www.irs.gov/individuals/article/ ... 96,00.html
    If all the software does it track it, you probably don't gain anything. If the software utilizes the info you have tracked, you gain the time you save by not having to do it by hand. You gain the ability to see the impact of multiple paychecks on tax liability. You gain the ability not to have to enter estimates for something the software can figure out for you. You gain the ability to see the impact of charitable, mortgage interest, property tax paid, and other deductions. You gain the ability to see the impact of interest and dividends.

    I get that YNAB doesn't purport to be, or want to be, Quicken. Budgeting, though, is only one aspect of a complete financial picture. I wish there were a better way than using YNAB for one thing and Quicken, or whatever, for everything else but it certainly doesn't look like there is.
  • LarryinLALarryinLA Posts: 297Member
    My wife gets variable 1098-T income, which has no withholding at all, as well as somewhat small amounts of W-2 income from several different sources, paid on different schedules, all of which have essentially no withholding. Figuring out how much to increase my weekly paycheck withholding to avoid penalties would be very valuable. Also, if I owe taxes, I need to budget to a rainy day category for them, but without a good record of how much taxable income we have, that's hard to figure out. Her 1098-T income doesn't have a "paycheck", it just gets direct deposited, and 1098-T forms are typically not available until February or March of the next year. All these transactions get entered into YNAB, though, and so if I could use YNAB to get a good total taxable income estimate, as well as a current withheld tax total that would be really, really helpful. I could enter that into a tax calculator (I'm not expecting YNAB to come with a tax estimator) and figure it out. Instead I have a spreadsheet where I separately track all these things, which means more opportunity to miss something. Since YNAB has the actual deposits, matched to actual account balances, that has a lot of incentive to be current and correct and be the best place to get a total.
  • PatzerPatzer Posts: 3,794Member, Beta Tester
    LarryinLA wrote:
    Her 1098-T income doesn't have a "paycheck", it just gets direct deposited, and 1098-T forms are typically not available until February or March of the next year. All these transactions get entered into YNAB, though, and so if I could use YNAB to get a good total taxable income estimate, as well as a current withheld tax total that would be really, really helpful.

    I can categorically state that YNAB cannot determine how much of your wife's 1098-T income will be taxable. That depends on how much qualified education expense you have; only the excess above qualified expenses is taxable. See IRS Pub 970, starting on page 5, for the gory details. Depending on how complex your situation is, you might also need to do further research.
    LarryinLA wrote:
    Instead I have a spreadsheet where I separately track all these things, which means more opportunity to miss something.

    The important thing about the spreadsheet is not the opportunity to miss things, but the opportunity to treat things differently for tax purposes than for budget purposes. I wouldn't want to mess up a working budget by creating categories only needed for tax tracking, particularly with something as subtle as education expenses. For example, tax rules could require you to split out a bookstore receipt between textbooks used for class, which are qualified, and notebooks not specifically required for class, which are not. But you might regard both the textbooks and the notebooks as education expenses for budget purposes.

    I'm not a big fan of trying to turn general purpose financial software into tax software. Congress changes the tax law too often, and the IRS comes up with rules implementing the law that are too obscure, for this to work well tracking things during the year. Example: In some tax years, computers purchased for school were qualified expenses. In others, they were not. What's the status in 2012? Depends on what Congress does to the tax law next December.

    Patzer
  • KenbuddyKenbuddy Posts: 1Member
    edited October 2013
    At this point, I'm not even concerned about "tax purposes."  For those of us who have built up our buffer, we should have the option to show income allocated to this month vs. expenses rather than income earned this month vs. expenses.  There should be a checkbox (or two radio buttons) somewhere on the page that lets you choose between these two options.  If the YNAB team is concerned about a report that may be misused by certain users, then they can display a warning on the page when you select the "show income allocated to this month" option.  Otherwise, as others have pointed out, this report is essentially useless.
    Post edited by Kenbuddy on
  • Turf_HackerTurf_Hacker Posts: 6,215Member, Moderator, YNAB Team, Beta Tester
    Actually, I find this report quite useful but only for its ability to provide me an average spent in a particular category. For any given month, the relationship between my income in that month (whether earned that month or budgeted that month) provides absolutely no truly useful information. Because I am putting money aside for future expenses, there is often a disconnect between the time the income arrived and the time the money was spent. For example, I budgeted for my vacation in March ($2,500) from my bonus but didn't spend this money until August. Just looking at August (and the income vs expense chart), it would look like I grossly overspent my income even though in the big picture I did nothing of the sort. The only truly important measure is how my spending compares to my budget category balances, not my income in any particular month.
    Kleonike
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