Re: tax escrow refund by via_newsgroup
via_newsgroup
Wed Feb 02 12:50:59 CST 2005
In microsoft.public.money, "Tom L" <Tom L@discussions.microsoft.com>
wrote:
>What's the most accurate way to record a tax escrow refund? When I make my
>mortgage payments, I split the transaction with a portion going to Taxes:
>Property. Recently when I received the refund, I just applied it under the
>payee name (the bank that I have my mortgage with) but instead of expense I
>put the amount in the income column and used the same account (taxes:
>property). Of course, I got the standard money message, this is an expense
>not an income account, etc. Is this how I should have handled it?
It is the best simple way.
The more exact simple way is to have the escrow payments transfer to
an asset account. Enter the actual property tax payments from that
account, and the refund would be a transfer back. That is probably
more trouble than it is worth, since you get your tax deduction
information from what the mortgage company sends.
You might want to consider paying your property taxes yourself when
the mortgage company permits. That is generally once you have enough
equity. The downside is that you have to remember to do so, and you
have to have the discipline to accumulate the money when not being
forced to do so. And if you are late with a property tax payment,
the county is very heavy handed with non-deductible penalties. The
convenience factor of the escrow account may make it worthwhile for
you to continue.
The upsides are that you can keep the interest on the money you
accumulate for the tax payment, and you can time when to send in
your property tax payments. For example, it might be wise to pay
your payment due March 2005 in December 2004. That way, if you
itemize in 2004, you could deduct that money on your 2005 taxes.