I'm self employed and have been increasing my use of Quickbooks over the past couple of years. In my first tax year I was only using it as a calculator, linked to my account but invoicing separately, this past year I have been invoicing through QB. I frequently have to add travel/parking expenses etc to my invoices, but as far as I can tell the way QB is set up those expenses seem to be added to my taxable income. How do I separate non-taxable reimbursements (parking etc) from taxable income (labour)? Is that possible?
Looking through the help section there are mentions of Billable Expenses, but I can't see that in my settings, perhaps because I'm on Self Employed QB? I'm prepared to accept that I'm being an idiot, but I can't seem to do it.
Yes, you're correct, the billable expense is available in the QuickBooks Online plan, Ozzy81.
It's possible that when you tagged the customer's payment, you toggled it as a Business that's why the travel/parking expense was posted as your taxable income. If the payment was directly downloaded from the connected bank within QBSE, you can exclude it. Then, manually split the payments posting the travel/parking expenses a Personal and labour amount and toggled as a Business type. Then, categorize them.
Let me show you how to exclude and add them:
Let me know if you need more help!
Thanks for your reply, Catherine.
I think I've got myself into a bit of a muddle, so forgive me for asking for some hand-holding.
So for every invoice with expenses there are 3 elements once I've linked up to my bank account: The record of (1) my payment for the expenses (eg payment to Uber), and the amount paid to me covering (2) labour and (3) expenses.
In this system do I exclude my payment, then split the fee received into business income and personal?
To split the fee received can I not use the Split function? The way you described it it seemed like I essentially need to exclude my fee and then re-input it as business income and the expenses as personal. Is that correct?
If you have your bank connected and there are transactions appearing on the transactions page, you can split either your income or expenditure into business or personal and split in a percentage or amount format.
Hi John, thank you for your reply, unfortunately that doesn't really help. I'm asking how to do something specific, please feel free to treat me like a five year old and explain the process. None of it is complicated, I'm just confused because I'm an idiot. There are no help pages in the Self Assessment section.
I seem to be having the same issue, maybe I can make this easier by posing a scenario:
I have completed work for a client at a flat rate of $300.00 for the day. The client has also agreed to pay meals, and transportation. I have to invoice my client the 300 plus meals (lets say $22.00), and transportation (lets say 100 miles at 58 cents per mile).
My invoice to the client is $380.00, but only $300.00 of that is taxable income. The other $80.00 is out of pocket expenses.
The client pays the invoice I have created in Quickbooks and will be marked as payed. However, my taxable income in quickbooks should be 300, not 380. When the check is received, my taxable income rises to $380.00. So how do we classify the expenses in the invoice to categorize those expenses from income and non-taxable income. There are other threads about changing the expense to personal but all expenses are classified under products and services; which all lead back to the same problem.
We need a way to properly bill the client with products and services (taxable income) and out of pockets expenses/reimbursements (non-taxable income).
Thanks for joining the Community space, @azionart.
We can edit the invoice created and separate the line item for taxable and non-taxable items. This way, your taxable income doesn't arise and you can classify the transaction correctly.
Check this article on how to create an invoice in QBSE: Create an invoice in QuickBooks Self-Employed.
In case you need help in categorising your downloaded transactions from your bank or enter into QuickBooks, click this article more info: Categorise transactions in QuickBooks Self-Employed
I've added our transactions page in QuickBooks Self-Employed. It contains articles that can help you manage your account and answer you're How do I questions: Transactions Hub for QBSE.
I'm always here if you still have questions about adding those items to your invoices or any concerns about QuickBooks. Let me know in the Reply section. Have a wonderful day.
I have the same issue, I have tried to follow the advice above but there is no option to select items as taxable or non-taxable.
Has anyone else had the same problem?
I have also checked the settings as I have seen mentioned elsewhere to change setting to 'record billable expenses' but this option is not available either.
I use QuickBooks Self-Employed
Thank you for joining the thread, @TealPlum73.
QuickBooks Self-Employed (QBSE) doesn't have an option to select items as taxable or non-taxable when creating an invoice. As a workaround shared by my colleague above, you'll need to add a separate line item for the taxable and non-taxable items.
On the other hand, recording billable expenses is only available in the QuickBooks Online (QBO) version.
I'm also adding these articles to learn more about creating invoices and categorizing transactions in QBSE:
Please post a reply below if you have other concerns with your transactions in QuickBooks Self-Employed. I'll be more than happy to assist you again, @TealPlum73.
Hi - this is an old thread but the features of each of the QB platforms is very confusing. QB self employed does not include a way to obtain reimbursement for expenses from a client without incurring taxable income treatment. That's sort of crazy because any individual contractor is going to bill for out of pocket and not expect to receive a tax bill for the reimbursement. How can this be an "upgraded" feature?
Also, I went to look at upgrading to QBOL and there 4 plans ranging from $12/mo to $350/mo and it is not clear which tier allows distinguishing between taxable and non taxable? If I am the only user, can I accomplish this very basic task in the $12 plan?
Also, if I migrate from Self Employed to QBOL will all of my data and categories automatically migrate?
Thanks for reaching out to us here, @bruce123.
I'll share some information about the taxable expense. In QuickBooks Self-Employed (QBSE), you'll have to make sure you've selected the correct category for your reimbursement expense. This way, the transaction won't be tagged as taxable or not.
You'll want to consider using Transfer or Personal since this isn't part of the business expense. Transfers in QBSE keep your accounting clean and accurate. I'd recommend consulting with an accountant to ensure you're recording this correctly.
Refer to these articles below for more information:
About QuickBooks Online (QBO), you'll have to sign up for QBO Essentials or Plus to include managing bills (billable expense). Learn more about each feature in this guide: Explore all QuickBooks Online features.
Concerning the migration process (QBSE to QBO), these two products are different as designed. While some transactions won't automatically be converted, you can look for a third-party application that'll handle the automatic transfer of data.
Here's the link for details about the process: Switch from QBSE to QBO.
Please know that you can always reply to this thread anytime if you have follow-up questions or concerns with your reimbursement expenses or with your QuickBooks account. I'm more than happy to assist you. Take care and have a good one.
i am with Bruce here. Aren't there tons of customers who are independent contractors billing for both services/labor AND expenses? this is seems so basic and important to have in QBSE. How can this not be a simple feature?
I understand your sentiments, @mac45.
I know how much of a difference it would make if we have the option to obtain reimbursement for expenses from clients without incurring taxable income treatment in QuickBooks Self-Employed (QBSE). Like you, I've been also anticipating for this option to be available.
With this, the best thing we can do is to send a request to our Product Engineers so this feature will be taken into consideration in future updates.
I'll gladly input the steps below so you can proceed. Here's how:
Additionally, I've included an article that'll guide you in creating and managing category rules to quickly categorise common expenses and income: Create rules to speed up reviews in QuickBooks Self-Employed.
Feel free to visit us again if you have follow-up questions about reimbursement expenses. We're always here to help. Take care.
Thanks for dropping by the Community, mac45.
I recognize every business has unique needs. Currently, QuickBooks Self-Employed (QBSE) doesn't have the ability to mark an expense as paid, reimbursed as payment, or invoice gets paid. We're also unable to attach files when sending invoices to clients.
While I understand how these features benefit your business, I'd encourage you to send feedback to our software engineers. This way, they'll be aware that you'd like to have these options in our future product developments. To do that:
Moreover, you'll have to categorise transactions in QBSE to place them on the correct line of your Schedule C. It includes transactions you've entered manually or downloaded from an online bank account.
Keep in touch if you have more questions about managing expenses and invoices. We're always available to lend you a hand. Keep safe!