How do we record a Corporate Tax Refund?

Diane18 · ‎March 11, 2019

Our Corporation Notice of Assessment came in and we received a refund. In the journal entry, do I debit the bank and credit the Federal Taxes Payable account (Other Current Liability) or the Taxes Payable (Expense account)?

Michelle-Long-CPA · ‎March 11, 2019

Do not enter it as a JE -- you very rarely enter JEs in QuickBooks. Enter it as a deposit, posted to the income tax expense account since it is a refund of your overpayment.

I hope this was helpful.

View solution in original post

Michelle-Long-CPA · ‎March 11, 2019

Do not enter it as a JE -- you very rarely enter JEs in QuickBooks. Enter it as a deposit, posted to the income tax expense account since it is a refund of your overpayment.

I hope this was helpful.

View solution in original post

Diane18 · ‎March 11, 2019

Thank you!

Michelle-Long-CPA · ‎March 11, 2019

You're welcome. :)

smedina1 · ‎March 11, 2019

Hi Michele,
Will this way you are suggesting work for payroll tax refunds or will it make my account go negative next payroll tax payment?
I tried the payroll tax refund feature in the payroll feature but it messed with the accounts and I had to enter an adjustment, it was a mess using the payroll tax feature.
I was hoping just doing a deposit like you describe would be less of a mess...

Teri · ‎March 11, 2019

Suggest you fix expense account to be called "Tax Expense" since "Tax Payable" is a liability account name.

mynewhome · ‎March 11, 2019

Should this deposit be backdated to tax year the refund was for or the date received?

qbteachmt · ‎March 11, 2019

You Make Deposit for the Date you got the Money and you Deposit this as "tax expense" refund, for a C Corp. For any other entity type, there is no Income Taxes expense for that entity.

hoymich · ‎March 11, 2019

Hi, I'm using Quickbooks desktop pro 2019. This is for a corporation. We received an income tax refund. I see the Income Tax Payable account has a negative amount (which matches the amount we just received from CRA). Can you tell me how to record a deposit to clear out this negative amount? I know, it's a very basic question..."Enter it as a deposit, posted to the income tax expense account since it is a refund of your overpayment" .... where do I go to enter a deposit? I normally go to receive payments screen but that's for customer invoices, and not for corp tax refunds. Any pointers are appreciated. Thx.

qbteachmt · ‎March 11, 2019

"where do I go to enter a deposit?"

Banking menu > Make Deposit.

Diane18 · ‎March 11, 2019

hoymich you can make a deposit for tax refunds in the "Make Deposits" window. You have to manually fill in the "Received From", "Account", "Memo" etc. Then Save and Close.

hoymich · ‎March 11, 2019

Thanks Diane and qbteachmt. I appreciate the quick response. I figured it out right after I posted the question....glad it's the same as your suggestion, re-assuring :-)

ladan · ‎June 27, 2019

it is a new question.

The company expects tax refund because of SR&ED credit . If I debit A?R and credit A/p in 2018(I am filing the T2), I can offset A/r with the bank when I receive it but what should I do withA/P. Does it last for ever in balance sheet?

Thank you

maleriemcdonald · ‎October 05, 2020

HI Michelle,

Just following this thread with the same issue.

If my income tax expense account balance is 0, and I post my refund it will result in a negative amount on my income statement. How do I resolve this?

Teri · ‎October 05, 2020

Agree, JE's s/b last choice on any accounting system. Used only when no better function exists. Not sure how this popped up in my email since I see it is old, but this is always worth repeating.

Teri · ‎October 05, 2020

Don't know Canada accounting or taxes and not to speak for Michelle, but can tell you in U.S. there is nothing to resolve unless you had previously recorded AR pending receipt of this refund. If so, then this refund should zero that out. If not, then this is properly accounted for as credit to expense in same account where you will record taxes paid next time, essentially reducing that future tax expense in total, IMHO.

Cindy630

How do i enter it as a deposit to income tax under what ??

Cindy630

I have an opening balance as a negative and want to add this payment refund cheque

Rebecca R

Hello there @Cindy630 and welcome to the Community,

I'm glad you've joined in on this thread to explore how best to record your Corporate Tax Refund. As I'm sure you've learned by reading through the other replies, this should be recorded as a Deposit to the appropriate tax account, as per your accountant's suggestions. You may need to set up the tax agency as a vendor if you haven't already. Since this may require setting up a new account. An accountant can advise you best.

Here's how you can connect with an accountant that's QuickBooks-certified, if you're not already working with one: Find an Accountant.

I'm here for all of your technical needs when it comes to using QuickBooks. Reach out if you have any other questions. Have a great day!

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How do we record a Corporate Tax Refund?