Sales Tax Adjustment

Hi there, thank you answering me.  I have only paid the remittance to CRA through our online banking which is not linked to our QB's.  I have not booked/filed the GST or the adjustments yet in QB.  I need to do the adjustments(s) entries first I believe then do the file return in QB's to match what I submitted to CRA.

Your help is appreciated.

Hi there, I am still not sure how to fix this error. This error was put to the GST sales account not ITC for this purchase I had booked below.  I didn't assign a tax code so its unassigned I  have already remitted this to CRA with this error but not yet booked in QB's.  How can I adjust this error to match what I have already remitted to CRA.   I remitted to CRA GST $385.50 (understated by $47.62) and ITC $151.78 (understated by $47.62). The amount due to CRA was correct .

How do I do a Sales Tax Adjustment for this unassigned amount to correct? Then I can book/file the Sales Tax in QB's correctly.  Thank you

Thanks for getting back to us and providing extra details, @Calgarygirl.

You're already on the right track! I'll just explain the fields you need to fill-out so you can successfully create the sales tax adjustment.

1. Adjustment Date – The date you created the adjustment. This is important so you can easily look this transaction once you customize reports.
2. If you track classes, select a class for this adjustment.
3. Sales Tax Item – select the sales tax item for the return line you want to adjust, such as GST Adjustments.
4. On the Adjustment Account, choose the appropriate account.
5. In the Amount section, enter the adjustment amount.
6. Choose the Increase Sales Tax line radio-button.
7. Click OK to save the changes.

Next thing you need do is create a Sales Receipt to enter the positive adjustment in sales tax. For detailed instruction and visual presentation, you can prefer to this link: Process sales tax adjustment.

I also recommend seeking an accountant for an expert's advice to ensure there will be no problem with the books in the future.

That should help you correct the recordings of your sales tax, Calgarygirl. If there's anything else you need or you have follow-up question, you can leave a comment below. I'm always here to offer help.

Hi  ,

I have used SAGE as well so I understand that QB will be very different for you.  From your screenshot, It appears that you are manually entering your GST by G/L account in the Expense section of the bill, instead of using QB's built-in GST tax provisions.  Only by using QB's built-in tax provisions will you be able to get a correct Sales Tax report.  QB is designed to work with only one GST account, with transactions being separated into 'collected' and 'ITC' by other means of classification in the Sales Tax items.

First of all, you need to ensure that you have your Sales Tax Items set up properly in your Item List.  QB has some default sales tax items, but check them to make sure they are what you need. 

 The sales tax information for your tax vendors determine which accounts are used with all of these codes.

When you drill down into these sales tax items (Note that they are Sales Tax Items), you have the opportunity to set the tax rate, the tax agency (Vendor that is designated as a tax agency in your Vendor list), and assignation of the code to a particular Sales Tax Return line. 

Now you use these Sales Tax Items to link up to your Sales Tax Codes. See example below for my list.

Drilling down into these items is where you set which 'Sales Tax Items' make up each code.  For example, I have one I have re-named 'B', (QB's original code was 'S', but it makes more sense to me to use 'B' for 'Both').  See below for my GST sales tax code which is 'G'.  Note that the Tax Item for Purchases and the Tax Item for sales are indicated with sales tax items from your Item List.

This ensures that when you use the Tax Code G on Bills , the tax is assigned properly as an ITC and populates the sales tax reports accordingly, and when you use Tax Code G on Invoices or Credit Memos, the GST collected is assigned properly and populates the sales tax reports accordingly.

Here is your transaction below using the tax code instead of the G/L account distribution:

Note that posting directly into the GST G/L account in this window (how you did it originally) will always result in Unassigned Sales Tax amount.  You will have to go back into your transactions and use the 'G' code to establish your ITC's, rather than coding directly to the GST G/L account.

Sometimes QB will calculate the GST off by a penny here or there, but no worries, you just override it right here on the bill.  Note that it automatically recognizes this GST transaction as an ITC.

Now you will File your Sales tax for a given period so the first thing I do is go to 'Manage Sales Tax' and open a summary report for Receiver General - GST Payable. 

The following report opens:

You can drill down into any of the numbers there to see where they are coming from (you will likely have to change the date range to 'ALL' once you have drilled down so the actual transactions will show up.)  Once you know this is all correct, Click on the File Tax Return button.  Once you do, the following dialogue will come up:

Click on File Return.  The following will come up:

I always choose Paper or other filing method as it gives me more control over the process.  Choose Continue.  Another diaglogue will come up asking if you want to print your sales tax return before filing.  At this point, a Payment dialogue will come up asking whether you want to pay now or pay later.  Whether you choose one or the other, this is the point at which QB takes your GST liability, removes it from the GST G/L Account and turns it into a Payable to your tax vendor in your A/P register.  I usually choose Pay Later.

You mentioned that you had already remitted the GST prior to discovering the incorrect attribution of GST to collected or ITC.  At this point I would go back to the cheque where you made payment for the GST originally and for which you had not yet filed in QB.  Change the account from the GST account you originally used and insert Accounts Payable account.  Tab over to the Customer:Job and enter your GST Tax Vendor (in my case it is called Receiver General).

Now go to your Pay Bills.  Click on Receiver General.  Note as soon as you do, there is now a Credit available.

Click on Set Credits and apply the credit to the Receiver General Bill.

Now you have filed all your GST properly, and applied your previous payment towards the filed amount.  There is no need to use the Adjustment window in the tax filing process.

Hi! I noticed you have a PST Self-Assessed (for Saskatchewan) tax item entry.

How do you use this entry to collect the assessment amounts? For example, I thought it would work with a US purchase (which has no Canadian taxes) to put it as an item with a negative amount on a credit card charge on the Items tab, and ensure the Expenses items include the self-assessment added expense. That way it would automatically track the self-assessments for each charge.

But I cannot select it in the dropdown for an Items tab's item. 

Conversely, I can select the GST Line 405 tax item in this same manner and with the amounts applied as described above, and it seems to be accounted for properly when viewing the Sales Tax > File Sales Tax report.

Thanks.

Hi @Achilles Heal ,

It works for GST because GST is already set up as a value added tax that tracks tax on purchases as well as sales. The PST, on the other hand, is a one way tax, on sales only. Any PST paid on goods and services becomes part of your cost and is not tracked and remitted to government. So when you try to do it within the transaction, you will not be able to because QB doesn't allow you to post to the PST sales tax items within a purchase document (bills or credit cards).

The only way to do a proper self-assessment for PST is to create a Journal Entry.  Believe me, I've tried every which way I can think of to avoid the JE, but nothing else works.  I'll give you an example of what my self-assessments look like for a given month.  

Here is the JE, which I keep adding to and re-balancing throughout the month, as I enter my payable invoices.  Most of mine are much longer than this for a month, but I found a shorter one that would fit in the window so I could show you.

Note that I have created two specific Sales Tax Items - One for 'PST Reverse on Purchases' (for PST we were charged and shouldn't have been, i.e. items for re-sale) and one for 'PST (Self-Assessed) (items we should have paid PST on and were not charged the PST).  This ensures these amounts show up in the Sales Tax Reports when you go to file PST.  Each line in the JE gets allocated to the expense account that the original expense was posted to.  I indicate whether it is a Reversal or a S/A in the memo line, followed by the Inv #.  Enter the vendor's name in Name, again, for tracking purposes.  The last two lines of the JE are the offsetting amounts to the PST for each type of entry.  

The tax in the above entry has already been filed so I can't show you a summary, but here is the detail  report of 'Box E Net Tax on Consumption'.

This is one of the last line of the 'Box B Tax Collected' detail report, which reflects that you are reducing your PST remittance by the amount that you were charged by Vendors that you shouldn't have been, the Reversal PST item.

Unfortunately, due to the nature of the entry (accounts that vary each month), it is very difficult to get a monthly report using normal custom filters.  So I have found that it works when I filter by the Num field, in which I change the three letters for the month each month.  For example, the Entry No. on the above JE is 'PST ADJ's Sep '19'.  I use report filters:  Date - Last Month; Number - PST ADJ's Sep'19; Transaction Type - Journal.  The report looks like this:

Next month you would change the number in your JE to 'PST ADJ's Oct '19'.  To pull the report, you would just have to change the Number in your report filter to match the number of the JE.

It sounds like a lot when you see it all spelled out here but it really isn't that bad once you get everything set up and just repeat the process each month.

Good luck!

Hi @Achilles Heal ,

Could you please elaborate on how to adjust GST Line 405?

Say the company bought a $100 item and the seller did not charge GST, should we add $5 to Line 405?

If so, how to do this in Quickbooks?

Thank you very much!

Wow. Thank you for the very in-depth explaination!