Depositing PayPal income into bank before QB interacts with bank

Carta · ‎November 09, 2018

I used to use QB Pro 2011 and then QB Online but several years ago I decided that my needs were simple enough to handle in Excel. I'm beginning to get more payments in PayPal and as I consider returning to QB (not sure if it'll be Online or Desktop), I want to find the easiest way to handle PayPal.

Here's how I get paid. I have graphics contracts and am usually paid by check. Some prefer to pay by credit card so I use PayPal. I use a bank with a business account (for my graphics payments) and a personal account. I deposit PayPal money directly to the bank's personal account. I think I set it up that way in QB long ago so QB could see the invoiced amount ($100) and the transaction fee ($3). I didn't want to deposit the net ($97) into my bank business account. Not sure why.

So...if I return to QB, is there any harm in depositing the PayPal net income to my business account and not deal with the bank fees? Tax-wise, not recording the PayPal fee is the same as simply recording the net income, right?

I'm asking so that I can set up QB in what looks easier--dealing with my bank business account rather than it and the PayPal account.

Rustler · ‎November 09, 2018

business funds should never get mixed with personal banking

as far as net profit goes, correct, net amount is the same as gross sales less fees, but accounting practice is gross and expense entered separately. It can also matter when computing sales tax since sales tax on the gross sale amount and not the net.

whether or not your service is subject to sales is a state determination, if you have checked with them and you do not have to collect/pay sales tax, that would be good. But it is still best practice to enter both gross and expense, an audit will expect that too

View solution in original post

Rustler · ‎November 09, 2018

business funds should never get mixed with personal banking

as far as net profit goes, correct, net amount is the same as gross sales less fees, but accounting practice is gross and expense entered separately. It can also matter when computing sales tax since sales tax on the gross sale amount and not the net.

whether or not your service is subject to sales is a state determination, if you have checked with them and you do not have to collect/pay sales tax, that would be good. But it is still best practice to enter both gross and expense, an audit will expect that too

Carta · ‎November 09, 2018

Thanks. Best practices are important to me. I treat PayPal as a bank to which I have a business account. It collects income and charges me a fee, just like my local brick-and-mortar bank does. So QB imports transactions from two financial institutions. And if audited, I’m fully transparent by showing income and expenses. I appreciate your answer.

Malcolm Ziman · ‎November 09, 2018

The new Connect to Paypal app in QBO, which is free, works well in capturing gross and net, as well as expenses you may pay using Paypal. It looks just like the bank feed, but has the ability to add Sales Receipts for income instead of Deposits, while simultaneously adding the Paypal fee as a separate transaction. This is in the For Review section and can be edited before adding to the books

Topics

Training

Community

Resources

Depositing PayPal income into bank before QB interacts with bank