Itc rule in qbo

Hi ernesto-correa-m,

It's great to see you joining here in the QuickBooks Community. You'll find a comprehensive Sales Tax module in QuickBooks Online that makes tracking your taxes a breeze. I can explain how the program deals with your ITC's.

QuickBooks Online requires that you Set up the sales tax module before it's able to track your taxes. Setting up your sales tax will tell the program where you do business. It sets up the Tax agency and a standard set of sales tax codes for you in the program.

To review the sales tax codes, you simply follow these steps:

1. Go to the Taxes on the left navigation menu.
2. Next, you choose the Sales Tax tab.
3. Click on the manage sales tax button.

Here you'll see the taxes created and this is where you'd create custom taxes or group rates. When you're setting up a custom rate, you'll enter the information for the ITCs. In the green circle is it says, I pay this on purchases. This is where you'd input the tax rate. If it's an ITC you'll check the box beside Taxes on purchases reclaimable.  

Finally, you click the add button.

Now when you enter transactions, QuickBooks knows whether it's a tax collected on sales, an ITC, or an expense by these settings. 

QuickBooks Online records your taxes collected or paid in the GST/HST payable account, increasing or decreasing it accordingly. When you file your sales tax return it moves the amount, refund, or payment to the GST/HST suspense account. When you record the payment, it moves out of the suspense account. The article I provided above explains in detail how to file the return and report the payment or refund.

I hope this answers all your questions about ITCs. If you have additional questions, please reach back out with a few more details. I'd like to be sure you're getting all the information you need. Have a great night!

When I set up a rule using this new tax code, do I have anything to do with splits in the rule. Does QBO automatically know to split the purchase into its ITC and costs components? What are the entries that happen oin the background?

Hi there. Glad to hear back from you. I'd like to make sure we're both on the same page. Could you elaborate more on how you set up the rule using the new tax code? Feel free to attach screenshots for visual reference. I'll be on standby.