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Diane18
Level 4
posted
‎March 11, 2019 09:05 PM
last updated ‎March 11, 2019 6:05 PM

How do we record a Corporate Tax Refund?

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)?

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Best answer March 11, 2019
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Michelle-Long-CPA
Level 4
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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.

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15 Comments
Michelle-Long-CPA
Level 4
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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

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Diane18
Level 4
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

Thank you!
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Michelle-Long-CPA
Level 4
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

You're welcome. :)
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smedina1
Level 1
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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...
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Teri
Level 9
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

Suggest you fix expense account to be called "Tax Expense" since "Tax Payable" is a liability account name.
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mynewhome
Level 1
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

Should this deposit be backdated to tax year  the refund was for or the date received?
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qbteachmt
Level 15
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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.
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hoymich
Level 1
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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.
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qbteachmt
Level 15
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

"where do I go to enter a deposit?"

Banking menu > Make Deposit.
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Diane18
Level 4
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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.
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hoymich
Level 1
‎March 11, 2019 09:05 PM

How do we record a Corporate Tax Refund?

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  :-)
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ladan
Level 1
‎June 27, 2019 06:09 PM

How do we record a Corporate Tax Refund?

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

 

 

 

 

 

 

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maleriemcdonald
Level 1
‎October 05, 2020 01:39 PM

How do we record a Corporate Tax Refund?

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? 

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Teri
Level 9
‎October 05, 2020 04:07 PM

How do we record a Corporate Tax Refund?

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.

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Teri
Level 9
‎October 05, 2020 04:59 PM

How do we record a Corporate Tax Refund?

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. 

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