Set up and use tax in QuickBooks Online

Learn how to set up and use the tax feature in QuickBooks Online.

You can add the tax on your invoices and receipts for easy and accurate filings. QuickBooks, then, lets you know when your tax payment is due, so you can file on time and avoid extra fees.

Here's how to set it all up and get started:

• Step 1: Learn how to calculate tax
• Step 2: Tell QuickBooks where you collect tax
• Step 3: Add tax categories to your products and services
• Step 4: Double-check your customers' info
• Step 5: Track tax from your customers
• Step 6: Check how much you owe and why
• Step 7: File your tax return

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Step 1: Learn how to calculate tax

The total tax rate for each sale could be based on various factors like:

• Your customer's tax exempt status.
• Where you sell or where you ship.
• Your service or product's tax category.

Learn more on how QuickBooks makes each tax calculation accurate.

Step 2: Tell QuickBooks where you collect tax

QuickBooks keeps track of tax on all of your transactions to accurately calculate tax and returns.

If you just signed up to QuickBooks, set up where you charge tax for the first time. To set up tax, follow the steps below:

1. Go to Taxes and select Set up tax.
2. Enter the Tax name, then enter a Description.
3. Tax agency name gets populated automatically based on the Tax name you've entered. You can change it if you wish.
4. Enter your Business ID No. (optional).
5. Select Start of current tax period and Filing frequency from the respective ▼ dropdowns.
6. Select your Reporting method (usually it'll be Accrual, but if in doubt, please consult your accountant).
7. Optionally, enter the Sales rate.
8. If you collect this tax on purchases, select the checkbox, and enter a Purchase rate (optional). Then, select the checkbox if your Purchase tax is reclaimable.
9. Select Next, then select OK.

Once you have set up the tax centre, you can also add custom tax rates.

Step 3: Add tax categories to your products and services

When you're ready, you can assign tax categories to anything you sell. This lets QuickBooks know how much tax you need to charge based on what exactly you're selling.

Step 4: Double-check your customers' info

The tax rates can also change if you ship products or perform services at your customer's address. And some customers are not required to pay tax, like churches, schools, or other non-profit organisations.

Make sure you have your customers' correct tax status, billing address, and shipping address. Here's how to double-check your customers' info in QuickBooks.

Step 5: Track tax from your customers

When you're done setting things up, you can start using the tax feature. We'll show you how it works and where you'll see it when you create an invoice or receipt for your customer.

Step 6: Check how much you owe and why

Get a detailed look at the tax you owe and why you owe it. This helps you make sure everything is accurate before you file and pay your tax return.

Learn how to run the Tax Liability Report to view your tax info anytime.

Step 7: File your tax return

This is the final step in ensuring your tax is set up correctly, so you’re ready to file your tax return.

QuickBooks tracks your payment due dates in one place so you can avoid late returns and penalties. Once it’s time to file, review what you owe to make sure everything is accurate. After you file, you can track your new tax payment in QuickBooks to keep your records up to date.

Learn how to file your tax return and record your tax payment.