We have several unpaid invoices from last year. They need be reversed out. We pay taxes on the accrual basis so taxes (including CA sales taxes) have been paid. Everything we have tried results in the invoice being "paid" by credit memo which does not reduce the gross amount and does not create an entry to credit the sales tax paid. Hope this is clear enough. Help!
Thanks for reaching out to the Community regarding your previous year’s unpaid invoices.
In situations like this, you'll need to process sales tax adjustments to properly record the transactions. If you’re using the online version, the new Sales TaxCenter lets you create sales tax adjustments with just a few clicks.
Select the Start Return button next to the tax you need to adjust.
Once you’ve done that you’ll see the Return summary screen.
Click on the drop-down menu, and select the reason for adjustment.
From the drop-down menu, select the account to apply the adjustment from.
Next, add the amount of the adjustment.
Then select Record payment. This allows you to enter the payment amount, date and account for the payment to be applied to this particular return.
Review the final summary and close the window. This will remove the return screen and add it to the History tab.
o adjust your sales tax due in QuickBooks Desktop:
Go to Vendors at the top menu bar.
Click on Sales Tax, and select Adjust Sales Tax Due.
In the Sales Tax Adjustment window:
Enter the Adjustment Date, Sales Tax vendor, Adjustment Account and other relevant information. Note: Choose an Income account if you’re making the adjustment because you received a discount/credit or if you are entering a negative rounding error. You’ll need to select an Expense account if you’re making the adjustment because you need to add penalties and fines or if you are entering a positive rounding error.
In the Adjustment section, choose if you need to increase or reduce sales tax then enter the adjustment amount.
Then click on OK.
Next, you'll need to adjust the amounts for sales tax items. You'll find the detailed instructions in the Process sales tax adjustment article.
Just make sure to go directly to the Adjust amounts for sales tax items section for the steps. I suggest consulting with your accountant for expert advice in regard to the account to be used when creating the adjustment.
Let me know if you have additional questions about the process. I'll be right here to answer them for you. Have a good one.
Credit memo should work. Yes, it will show as "Paid" status (in QBO, they don't have adjustment type form yet), but it will clear customer account. You will need to make product/service item taxable to show credit to sales tax amount at the bottom. That will reduce the sales tax liability on next sales tax return.
OK ... This is what I did and I cannot get the right result. The CM does "zero out" the invoice and remove it BUT, even though the item is taxable and even though the tax amount does appear in the proper place on the CM, the sales tax due remains unaffected. The total taxable sales for the period is also unaffected. I would expect both to be less. I will be going over it looking for any errors I may have made over the next few days and will be back with a response.