Wages Gross/Net
The guide for the earnings tab states that one enters "Wages gross of employee contributions to retirement accounts. (Enter those contributions under Retirement Accounts). Enter wages net of all other non-taxable employee payments, like contributions to health plans." It further states, "Enter employee wages gross of parking and other taxable payroll deductions. Enter such payments under special expenditures." [You probably know this from memory but it helps me to present my question/ confusion.]
Please bear with me as I am an engineer by training but as I am familiar with the terms' usages, I would expect it to read in simpler terms:
"Enter wages excluding [net of] employee contributions to requirement accounts, which are entered under retirement accounts. Include in [gross]wages all other non-taxable employee payments, like contributions to health plans. Enter employee wages excluding [net of] parking and other taxable payroll deductions. Enter such payments under special expenditures."
Is my interpretation correct?
Thanks.
RSS
You're right, this has confused other people and should be simpler. There's a new tutorial but I haven't reviewed it.
You enter your gross wages under all but the most unusual circumstances. The only exception is if part of your wages EXCEPT for your retirement account contributions (which we deal with ourselves) are non-taxable. In that case, you would subtract the non-taxable part from your gross wages and enter it as a non-taxable special receipt.
Hypothetically, you have a business that handles a lot of cash and you, unethical person that you are, decide that you don't want Uncle Sam or his state equivalent to have their "fair" share so you keep 30% of the cash "off the books". By the way, this is tax evasion and will get you arrested. Our current administration may be lax on human rights, privacy, and virtually every other constitutional guarantee but they are hell on wheels on tax evasion, so don't do it. Now you want to use ESPlanner, but in order to get accurate planning data you have to tell it about that 30% that you don't pay taxes on. You enter your gross wages (the number you report on your taxes) in the Earnings tab and you enter the off-the-books income as a non-taxable special receipt.
Another hypothetical example, you have a personal corporation of some kind (P.C, sub-chapter S, etc.) and are expensing personal use items against the corporation. This is also illegal, so don't try this at home boys and girls. To use ESPlanner to get good planning data, enter your gross wages as usual and enter the stuff you expense against the corporation for your personal use as a non-taxable special receipt.
I'm not advocating tax evasion (illegal) but I highly encourage tax avoidance (legal). Look into the Fair Tax proposals that Congress has ignored, vote for critters that actually do things about the fiscal mess that we're in, and otherwise do everything you can to live well and starve the monster that the federal government has become.
Best,
Dick Munroe
p.s. These opinions are mine and mine only and represent those of no other entity, individual or corporate.
Munroe -
I'm still having some difficulty with the concepts. Here's a list of items. What does and doesn't get included with earnings. Some I think I have figured out from the instructions and have indicated so. Don't hesitate to tell me if I'm wrong in my interpretation.
1. Federal withholding
2. State withholding
3. Before tax deductions
a: Retirement - not included in earnings; entered in retirement section
b: Health insurance
4. After tax deductions
a: Union dues - special expenditure?
b: Parking - special expenditure
I took a quick look at the new tutorial and it appears to be a refinement of presentation using Adobe Acrobat 8, rather than a change in content. The "Joe and Sally" example doesn't do it for me.
Thanks again.
Everything on your list gets included in earnings.
If your union dues and parking costs are a tax deduction, you would enter them as an appropriate special expenditure (tax deductible). If they are to be taken off the top of your adjusted gross income, enter them as excludible.
For budgeting purposes, I find ESPlanner easiest to use if I ignore special expenditures and just run it with the rest of the data entered. I than look at my actual monthly expenditures and the annual recommendations and see how close I am. Then I analyze that same checkbook for special expenditures (unusual expenditures, groceries aren't unusual, college is) and enter them as appropriate. A regularly occurring, tax deductible expense other than the ones we already take care of in ESPlanner would qualify as unusual, so you would enter that as a special expenditure. A looming expense (like college tuition or a new car) would also qualify as a special expenditure.
Basically, don't worry too much about it. Enter your gross wages. If there are any unusual deductions from your paycheck (union dues, parking) that you see happening "forever", enter those as special expenditures and classify them appropriately. Then run ESPlanner.
Best,
Dick Munroe
This post about what is/isn't earnings hasn't cleared up my confusion.
So here's my understanding, expressed as a math formula and in plain English. Are the explanations correct?
Math Formula
W2 Gross Earnings (before taxes, motherhood, or apple pie)
---------------------------------
Earnings to Enter as Employee Wages
Net Profit from Business (from tax form Schedule C)
---------------------------------
Earnings to Enter as Self-Employment Earnings
Note: If you expect to have a net loss from self-employment, then enter 0.
In Plain English
Enter gross positive earnings minus retirement contributions on the Earnings screen. Do not enter negative earnings.
Enter retirement contributions on the Retirement Accounts screen.
If your Employer (W2) or Self-Employed earnings have significant, non-retirement amounts that are tax deductible or will not be taxed, then enter those amounts on the Special Expenditures Screen.
HI ROSE, THIS IS LARRY. I REPLY IN CAPS BELOW. BEST, LARRY
In Plain English
Enter gross positive earnings minus retirement contributions on the Earnings screen. Do not enter negative earnings.
NO, THIS IS WRONG. ENTER GROSS EARNINGS PERIOD. DO NOT SUBTRACT RETIREMENT CONTRIBUTIONS. WHEN YOU TELL THE PROGRAM WHAT YOUR TAX-DEDUCTIBLE CONTRIBUTIONS WILL BE, IT KNOWS TO SUBTRACT THEM FROM YOUR GROSS EARNINGS IN DETERMINING YOUR TAXES.
Enter retirement contributions on the Retirement Accounts screen.
YES. THIS IS CORRECT.
If your Employer (W2) or Self-Employed earnings have significant, non-retirement amounts that are tax deductible or will not be taxed, then enter those amounts on the Special Expenditures Screen.
IF WE ARE TALKING, SAY, ABOUT PARKING FEES (I HAVE TO PAY THESE AT THE UNIVERSITY), YOU'D ENTER THESE AS NON-TAX RELATED SPECIAL EXPENDITURES. IF WE ARE TAKING ABOUT MEDICAL EXPENSES UNDER A CAFETERIAL PLAN, YOU'D ENTER THEM AS SPECIAL EXPENSES THAT ARE EXCLUDABLE FROM AGI.
Dick Munroe writes, above (10 May 2007):
"You enter your gross wages under all but the most unusual circumstances. The only exception is if part of your wages EXCEPT for your retirement account contributions (which we deal with ourselves) are non-taxable. In that case, you would subtract the non-taxable part from your gross wages and enter it as a non-taxable special receipt."
If this is correct (and if I understand it correctly), such circumstances are not unusual at all. Health insurance premiums paid through one's employer are not taxable, and, as far as I know, that's how most people pay for their health coverage. This would only seem unusual to someone whose entire health insurance premium is paid by their employer, but that's not common nowadays. (Except perhaps in a university setting? -- which would explain why it seems unusual to you.)
Because paying health ins. premiums thru one's employer is a common scenario, and often involves a hefty chunk of change, it seems to me the instructions above to enter those amounts as non-taxable special RECEIPTS needs to be emphasized in the Guide and the Help Manual. I don't see that the Guide addresses this at all, and the Help Manual seems to actually have it wrong (p.9):
"Enter wages, including your contributions to retirement accounts (the program will be aware of tax deferred contributions when calculating your taxes). Other amounts such as payments to cafeteria health plans, parking, or union dues can be entered as taxable or non-taxable special EXPENDITURES. (see Special Folder below)." (Caps emphasis mine)
Please clarify.
Thanks,
Greta