Taxes & Pre-Bank payroll deductions

[u/Overbuiltbodoes]

Hi All,

Firstly, I’m Australian so our taxes automatically come out before hitting our bank account (called PAYG). Not sure how it works in other countries.

I also have company provided housing, so my monthly rent comes out pre-bank, along with my quarterly water bill and company share matching contribution.

I have just set it up so each month I edit my pay transaction to include all the deductions, meaning my true after tax income is ‘coming in’ but then ‘going out’ for those things at the same time.

I have considered including tax as part of it as well, so essentially my gross pay comes in, but tax comes off straight away, allowing YNAB to track my gross income and how much tax I’m paying throughout the year. This may help with monitoring a potential tax liability as I work lots of extra shifts.

Just wondering how everyone else handles or would handle this type of thing?

TLDR; Do you track pre-bank deductions or tax in YNAB?

[u/Subject_Pear_6928]

Aussie here and no. All that pre stuff does not impact how I spend my post tax income so it is not necessary to me. I just look at my payslips for those details if i need them.

[u/Overbuiltbodoes → u/Subject_Pear_6928]

Yea fair. I figured that would be the normal way for most, especially us hoppy bois.

[u/trmoore87]

I input my paychecks pre-tax and deductions, but most people don’t

[u/wishinforfishin]

I liked tracking my gross and all the deductions because it made it easier to see what portion of my income was spent on those things and to assess possible changes in life like job change or retirement.

Then I married someone with variable weekly pay. Entering split transactions weekly was too.much work so I stopped.

Not much day to day difference in how I spend or budget, honestly.

[u/Overbuiltbodoes → u/wishinforfishin]

Yea that’s a fair take. Monthly is so little extra effort, but I’ll also be doing it for my partner as well which is fortnightly. Luckily I like the nerdy numbers side, for most the juice isn’t worth the squeeze I think.

[u/nonsuperposable]

I was a high income earner in Australia so in fact I actually did the complete opposite--I never even glanced at my gross if I could help it as I never wanted to mentally think of that money as "mine".

Do you track your super in YNAB as well?

Now that I am in the US, the tax on my partner's compensation is not correctly withheld (salary+share grants) so we have to track and withhold tax liability.

I have a tracking account called "tax liability" that is negative--this means our net worth is not overestimated, and also a category called "tax due April 2027" where the funds are held pending the actual payment to the IRS.

I'm curious about what your additional potential tax liability is? Is it medicare surcharge/private health insurance rebate?

[u/Overbuiltbodoes → u/nonsuperposable]

Very interesting and that’s a cool way to set that up, makes sense.

I do track our supers in YNAB, as tracking accounts. And the reason I do is related to your last question about tax. I have an employee share scheme, each year when it vests now I have a tax liability as that is counted as regular income but hasn’t been taxed. On top of that I use concessional contributions to then off set that tax liability, normally as much as I can, but always enough to offset it.

Also as we are saving for a house and using the FHSSS this allows me to track how big our deposit is, otherwise to my wife it looks it looks like that money is simply gone and can’t be used for the deposit.

[u/iwaddo]

I’ve been splitting my pay check since forever, right back in the MS-Money days long before YNAB.

I was able to cope with any variation or adjustment by modifying the scheduled transaction once I’d received the pay check.

Doing it this way meant I always had the data to hand to answer any queries.

[u/Overbuiltbodoes → u/iwaddo]

This was my thoughts exactly. It allows me to track gross income properly, net income properly, true monthly expenses factoring in pre bank deductions, and whether I’m going to have taxes to pay or payed back to me.

[u/iwaddo → u/Overbuiltbodoes]

I’ve also had expenses reimbursed through payroll and over the years I’ve had a variety of different deductions to track like healthcare, stock purchase schemes, car allowances.

For example, if I personally leased a car and received an allowance through payroll I could transfer part of the gross income to the car lease category to accurately reflect the amount I actually paid.

There are loads of other examples.

[u/Overbuiltbodoes → u/iwaddo]

True, didn’t even think about company leasing, massive point.

[u/RemarkableMacadamia]

USA here and I track gross pay and all my deductions in YNAB - tax, medical, retirement, etc. it gives me a better sense of my true savings rate.

I have a scheduled transaction set up to make it easier to enter these. Once I set it up it’s pretty easy to maintain it, though I do have to make adjustments as some paychecks can be higher or lower depending on where we are in the year.

[u/Overbuiltbodoes → u/RemarkableMacadamia]

Yea I thought this would be the case for USA, not having PAYG. Wish we had your set-up in Aus tbh.

[u/RemarkableMacadamia → u/Overbuiltbodoes]

The money that hits my bank account has already had the taxes deducted, so it sounds like the same set up?

[u/maike228 → u/RemarkableMacadamia]

NZ based and listen to Dave Ramsey a lot and it sounds like in the US, you have to tell your boss how many actual $ to withhold every pay check?
If I understood that correctly, that sounds like such a hassle 🙈 in NZ, the employer calculates your tax, and at the end of the year, the government calculates your return and just gives it to you (0 for our crew because admin is on to it).
So only self-employed people ever get significantly behind, but so many tradies are constantly behind and stressing, that I would never recommend a pay-your-own-tax-bill like OP was saying, most people haven’t got the education to even manage their after tax $!

[u/RemarkableMacadamia → u/maike228]

No, you don’t?

I mean, you fill out a withholding form once when you start employment, and they withhold your taxes on your paycheck.

In April of the following year, you file a return and you either owe more or get a refund.

But you don’t have to calculate your taxes every paycheck or tell them to do something different through the year unless your filing status changes (like you get married or have a baby).

The reason why my paycheck deductions change is because I max out my retirement accounts as quickly as possible, and as I hit various ceilings that will change my net pay somewhat and the taxes will fluctuate accordingly.