How would one categorize tax refunds/owings?

Is this for YNAB or a general question?

* Tax Refunds: A tax refund can be seen as "Income" since it increases your available cash. You might categorize it as "Income: To be Budgeted" in YNAB. This allows you to allocate this unexpected income to various budget categories according to your current financial goals or needs. Some may choose to put it towards savings, debt payment, or even distribute it among several spending categories. * Tax Owed: If you owe taxes, this would be considered an expense since it's money you need to pay out. You could create a specific budget category for taxes owed, such as "Expenses: Taxes Owed" or simply "Tax Payment." This way, you can set aside money each month into this category, so you're prepared when it's time to make the payment.

Is there a way to know how much taxes you will owe at the end of the year in order to budget monthly in advance?

If you set your withholdings correctly, you shouldn't owe any money at the end of the year

A tax refund is usually salary money you never accounted for since it went straight to the irs, so in theory I'd categorize it as salary

@steep-intern-54134 are you a W2 or 1099?

There is a perspective out there to have minimal withholdings so that you can leverage that money for earning interest. If we are just talking salary income, I think knowing what you’ll owe comes down to a math equation- tax rates are all publicly available and can give you a loose approximation (there are a few free calculators out there so give you an estimate). What you’ll owe in taxes can get trickier once you start adding other income streams besides your W2…like If you’re operating even a small business, it’s not a good idea to wait until the end of the year to pay all those taxes at once (unless the underpayment penalties outweigh the returns on what that money made in your hands which is pretty unlikely)

Loving everyone's answers. I gave mine under the assumption berelowitz is on w2 income only which I believe is the case, but if it's not there is a lot more nuance to this question.

Yes our income is all w2, although I don’t believe I have updated anything since I filled out when I started working, so could it be that if things have changed (such as having a baby, moving states, etc) then the withholding are off and need to be adjusted?

Yes that is exactly the issue.

@fresh-pilot-83865 would you mind explaining more on the benefits of minimizing witholdings?

He is saying if you pay less taxes during the year you can invest the money until you have to pay the government when taxes are due.

@steep-intern-54134 even having the money in a bank yielding 5% APY is better (in my book) than giving it to the government… the obvious key there though is that you have to make sure the money doesn’t get spent before you pay what you owe

I believe there is some sort of penalty if you withhold too little taxes during the year. I'm not sure what the margin is, but it's something I'd look into before lowering my withholdings.