Add Input Tax Credit Only

ajain185 · ‎October 18, 2021

Hello there,

I'm having difficulty recording an input tax credit only in quickbooks against a cheque paid out to a vendor.

Scenario:

An insured property owned by Company A was damaged in a storm and a vendor was brought in by Company A's insurance company to help cleanup. The vendor issued an invoice to Company A's insurance company for work completed. The insurance company only paid the pre-tax amount to the vendor leaving Company A to pay the outstanding taxes (HST in this case) for that invoice. Company A paid the taxes to the vendor with a Cheque from their Bank Account.

In QBO, the entry is pulled in from the bank however I am having difficulty in QBO assigning 100% of that cheque's value as an ITC. I have tried assigning the individual expense transaction category in QBO as GST/HST Payable: GST/HST Paid with no tax applied to the amount.

Should I be doing something else to recognize 100% of this payment as an ITC so that when I run a Taxable Sales Summary report (Taxes -> Sales Taxes) this entire amount is listed under HST on purchases (Input Tax Credit)(13%)?

Would appreciate some guidance. Thank you in advance.

PrachiJoshi · ‎October 18, 2021

You can create a check like this:

Expense account $0.01 select HST as tax code

Expense account -$0.01

Then at the bottom enter the total tax amount in the HST box. The total will be equal to HST amount and you will have full ITCs.

View solution in original post

PrachiJoshi · ‎October 18, 2021

You can create a check like this:

Expense account $0.01 select HST as tax code

Expense account -$0.01

Then at the bottom enter the total tax amount in the HST box. The total will be equal to HST amount and you will have full ITCs.

ajain185 · ‎October 19, 2021

Thank you, this worked perfectly.

I also had to adjust that the final amount calculated is "Exclusive of Tax".

SSWap5922 · ‎November 19, 2021

Hello Prachi,

Just curios to know if you think a Journal Entry could have accomplished this as well? I'm asking not just for OPs potential benefit but also my own in better understanding how what QBO gives users' interacts with standard journal entries. Appreciate any insights you have, whether it's this specific topic or pointing me to another thread!

PrachiJoshi · ‎November 21, 2021

No. A journal entry will not accomplish the same thing. You are not able to adjust the sales tax in a JE.

SSWap5922 · ‎November 22, 2021

Do you mean because the software won't let you adjust sales tax amount when using the module to post tax amounts on bills, invoices, expenses, etc? Would you, in theory, be able to use JEs if you avoided the tax module altogether (i.e., set up corresponding asset and liability accounts; GST collected - ITCs as a Dr to that asset account when posting an expense along with corresponding Cr Cash and Cr GST Payable liability)? Or are you basically re-creating what QBO has already created for you in providing the tax module?

Sorry if this is confusing or deserves to be in another thread all its own!

Thanks,

PrachiJoshi · ‎November 22, 2021

Sales tax module in QBO is very good (I would say the best in the market) and it retains the information that was used to file a sales tax return, unlike a GL which shows entries based on dates. It comes in very handy if you have a sales tax audit.

If you create a journal entry, you can use the sales tax liability or asset accounts (though I will not advice it). But the information will not go in the sales tax module. You do need the sales tax amounts to go in the sales tax module.

If you have a specific situation, please post it. And I will try my best to answer it.

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Add Input Tax Credit Only