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Top 5- Year End Paying Taxes

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Welcome back to another round of Top 5 questions! This time around, we will be focusing on the topic of Paying Taxes. If you’re interested in knowing more about how to go about fixing incorrect sales tax, adding another location that is out of state, or how to enter your sales tax, then this one is for you.
 
Let’s go through these questions together!
 

1. Should I enter my sales tax as an expense every time I pay it or is that automatically figured in...

Thanks for the question!
 
When you charge your customer's sales tax, it posts to the Sales Tax Liability account (as a credit) in your chart of accounts. When you pay the collected tax to your state revenue department, you would post that payment to the same Sales Tax Liability account (as a debit) to reduce your liability.
 
Generally, the sales taxes would not go through your P&L.  Now if you are talking about sales taxes you pay on purchases, then in that case, I would post the taxes to the same expense account as the purchase. In other words, if you purchased office supplies on which sales taxes were charged, the entire amount including sales taxes paid would post to office supplies.
 

2. How do I record an Estimated Tax Payment in QuickBooks Self-Employed?

Let me walk you through this!
 
You can record your estimated tax payments in QuickBooks Self-Employed in three ways. I'll show you how.
 
For the first option:
  1. Go to Taxes from the left menu.
  2. Set the year.
  3. Select the Quarterly tab.
  4. Choose the quarter you want to mark the tax payment for.
  5. Click Find your estimated tax payments beside Don't see your payment.
  6. Check off the tax payment.
  7. Hit Mark as a tax payment.
The screenshot below shows you the first five steps.
 

 

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Second, let's go to the Transactions tab to check your business spending transactions. Then, manually assign its category from Taxes & Licenses to Estimated Taxes.
 
Third, if you print a tax payment coupon, we automatically match the spending transaction when it appears in our system. Please take note that we don’t count estimated taxes as “paid” when you print it. For more details, check out this article: Schedule C: Estimated Taxes.
 
If you want to pay the taxes electronically, you'll have the option to pay directly to eftps.gov or within QBSE. For detailed steps, see the Make payments online section through this article: Estimated Taxes.
 
Your estimated taxes will appear on the Tax Summary and Tax Details reports. These won't show on the Profit & Loss report. To learn more about this, see the Estimated Taxes section through this article: QBSE Schedule C Categories Breakdown. This link provides you with more information on where the other accounts will appear on various reports in the software.
 
That should do it!
 

3. My sales tax is incorrect in QuickBooks Online. How do I fix this?

I’ll help you out!
 
QuickBooks Online automatically calculates the total sales tax rate based on your customer's sales tax-exempt status, the location where you sell/where you ship, and your service or product's sales tax category. The total sales tax rates are the sum of state rates and local rates, including the city, county, and/or district rates.
 
We can create a sales tax adjustment to record a credit to match the sales tax payment. To do this,  you'll need to create an account for the adjustment.
 
You can set up an income account if you want to decrease the amount due, or an expense account if you need to increase the sales tax due. I'd also suggest consulting an accountant in order to choose the appropriate account and detail types.
 
Once verified, you can follow the steps below:
  1. Go to the Gear icon, then Chart of Accounts.
  2. Click on New.
  3. Choose Income or Expense from the Account Type drop-down.
  4. Select the account's Detail Type.
  5.  Name your adjustment account.
  6. Click on Save and Close.
 
After that, go to the Sales Tax tab to add an adjustment. Here's how:
  1. Go to Taxes from the left menu, then the Sales Tax tab.
  2. Locate the tax period you need to adjust and hit View Return.
  3. Tap Add an adjustment.
  4. Select the Reason for the adjustment.
  5. Choose the Account for adjusting sales tax.
  6. Enter the adjustment amount.
  7. Click Add.

 

Here's an article for the detailed instructions: Create or delete a sales tax adjustment in QuickBooks Online.
 
I'm also adding this link in case you need help managing sales tax. It contains topics with articles to guide you along: Manage taxes in QuickBooks.
 

4. How do I label Non-Taxable income so that it shows as income but doesn't register when filing my ...

Great question!
 
QuickBooks Self-Employed only tracks your self-employment business income, expenses, mileage, and tax info. Any non-taxable items shall be marked as Personal.
 
The following items are deemed nontaxable by the IRS:
  • Inheritances, gifts, and bequests
  • Cash rebates on items you purchase from a retailer, manufacturer, or dealer
  • Alimony payments (for divorce decrees finalized after 2018)
  • Child support payments
  • Most healthcare benefits
  • Money that is reimbursed from qualifying adoptions
  • Welfare payments

 

You can also check out this link to learn more about categorizing transactions in QBSE.
 

5. I’m adding another location that is out of State. How do I manage state income taxes?

I’ll gladly show you how!
 
QuickBooks uses a work location to calculate multi-state payroll taxes. If you're using the same QuickBooks Online and payroll account for your second office, you can add a new work location for your state taxes.
 
To do so, here are the following steps:
  1. Go to Gear, then Payroll settings.
  2. Choose Work Locations under Business Information.
  3. Select the Add a Work Location link. Then, enter new work location details.
  4. Hit Save.

 

Once done, enter the new work location into your employee's settings. Here's how:
  1. Go to Workers, then Employees.
  2. Choose the employee's name, then Edit employee. For new employees, tick Add an employee.
  3. Click the Employment tab.
  4. Select the added Work Location from the drop-down.
  5. Hit Done.

 

However, if you're required a separate account for your state tax form, you'll have to subscribe to a new account. Then, use the second office's address as your primary business address.
 
You can visit our page to learn about our different subscriptions at this link: QuickBooks products. I've also added this awesome article about multi-state employment payroll situations that I'm sure you'll find helpful. In this article, you'll learn about the different multi-state situations with its reciprocity agreements.
 
With these steps, you should now be able to record your payroll taxes correctly!
 
That concludes today’s Top 5 Year End paying taxes questions. I hope you found these helpful and got some valuable resources out of it. As always, if you have any other questions or concerns, please feel free to ask us here in the Community.  
 
We will be back with more questions on this topic so make sure to keep an eye out!

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