Monthly Accounting for End-of-year Bonuses?

Is there a way to factor end-of-year bonuses into my income budget? I get ~30% of my income in December so budget apps always think I’m overspending month-to-month since we plan on that bonus income for our mortgage, etc.

I’m sure I’m not the only one this applies to, so I’d appreciate advice on how to get Tiller to allocate some portion of my “expected bonus” into an ongoing basis for budgeting purposes.

Thanks!

H @mmurdock,
If you get your bonus in December 2020, I assume you want to have your budgets adjusted for 2021 to account for the bonus?

It would seem dangerous to adjust budgets prior to December 2020. You can’t spend that money until you have it. Also, if you didn’t get the bonus, that would cause problems. For 2020, you might be using 2019’s bonus.

For the bonus in December, you could divide it by 12 and include 12th of the income in Dec 2020 and then for the next 11 months.

When you get the bonus, you could divide the fully payment by 12. You could categorized 1/12th of the bonus as Bonus Income and budget 1/12th of the amount in December. The other 11/12th of the Bonus could be Categorized as Bonus Income Deferred. Make this an Income Category but hide it.

Then every month, 2 two manual transactions. The amount would be 1/12th of your bonus. One transactions increases your Bonus Income category. The other Transaction reduces your Bonus Income Deferred Category.

By December 2021, you won’t have any money in the Bonus Income Deferred Category. And the Bonus Income category will have created 1/12th of you bonus as Income (available to Budget) every month.

If you need to spend your bonus in non-equal monthly portions, you can make those 2 manual transactions at different times and for different amounts. They just need to equal out. Also, you can’t add to Bonus Income once your Bonus Income Deferred Category becomes empty.

Would that work?

Maybe some of the accountants on here could provide additional feedback?

Jon

I have never done budgets and therefore am unfamiliar with any of the budget tools in Tiller. I am not sure how you should handle this from a budget perspective but I will let others provide that direction.

Based on what I assume your situation is, that December 2020 bonus is income in 2020 and is taxable in 2020. Although the amount might be consistent over past years, it is discretionary, it might be higher, it might be lower, and it might be zero. This bonus is likely included in your last paycheck of the year with all the applicable payroll deductions, withholdings, etc.

Whatever you do, just be sure you understand it fully before proceeding. You actually might be changing the underlying transaction if you are not careful.

Good luck.

B

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It’s actually fairly predictable since it primarily consists of the vesting of stock bonuses, etc. Understood and agree about the tax implications, just trying to figure out a straightforward way to have some portion of it “drip fed” into monthly income.

Easiest way i have found is to move the money into a savings account (with the in and out coded as “transfer”), and then transfer 1/12th back into the checking account on a monthly basis, coded as income.

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@jsiglin Great, simple solution. Thank you.