We overpaid on our estimated state income tax in 2018. We now find that we will get a refund in 2019. Instead of receiving a check, we can apply the refund toward our 2019 estimated state income tax payment to make it less. How do we show the refund in the accrual financial statements in 2018, and then apply that in 2019 to the payment due?
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Hi there, lstjacques.
Thanks for taking the time to reached out to us. I'm here to help and provide some information on how to record a state income tax refund.
Once you have an overpayment, QuickBooks will detect it and will automatically lower the amount of the next liability periods by the overpayment amount. You may also pull up the Payroll Liability Balances report, to check the overpayment amount.
For additional reference, you can check this article: Run payroll liability balances report.
If you need further assistance from our phone support, here's how you can contact them:
If you have additional questions about the overpayment in QuickBooks. I'll be around to help.
Thank you, but this is not about payroll but CT State income tax, which is not payroll tax, so this doesn't work for what we need. Is there another solution?
Hello there, lstjacques.
Thank you for getting back to us in the Community. I'm here to provide additional assistance with State Income Tax overpayment in QuickBooks Desktop.
If you already consulted your State agency and they allow you to apply the overpayment to the current year, you can add the refund as a payment in the system. Once you enter them, it'll decrease your tax due in the system.
I'm adding an article for more insights about entering historical tax payments:
Please keep in touch with me here so I can ensure your issue is addressed.
Thank you, but when I go to read through and do it, still seems likes it's a payroll thing which is not what I wanted. We've done a GJE and will fix the accountant will fix it manually. Thanks for trying.
Hello there, @lstjacques.
Recording the refund you’ve received from your state to the correct account in the chart of accounts is my priority. With that being said, allow me to share some information on how this works in QuickBooks Desktop.
If I may ask, what account in the chart of accounts were affected when you send a payment for your estimated state income tax in 2018? If you use QuickBooks in paying your estimated state income tax, may I ask how did you made the payment? If the state income tax payments was paid after running a payroll, you may refer to the steps provided by my colleague, @JanyRoseB, in recording the refund. The refund will be applied to the payroll liability account.
If you write a check and paid your State Tax agency with it, then you can record the refund like how a vendor refund is processed in QuickBooks Desktop.
Lastly, if you are referring to the Sales tax you’ve paid. To record the refund you’ve received, you can do it by creating a sales tax adjustment. For detailed instructions, you may check out this article: Process sales tax adjustment.
If you’re still unable to record your refunds, I’d recommend reaching out to Customer Care team. A specialist will be able to look up your account securely and further assist you via secured remote access session.
Here’s how to contact us:
Stay in touch with me and let me know how it works on your end. I ‘m always here to help you accurately record the refund you’ve received in QuickBooks Desktop.
You either Have a Refund, or Have the overpayment condition.
If you overpaid the Payroll item on the Liability Tab, the payroll system already has the Amount as negative. Next time you generate that payment, use Create Custom Liability payments and include the timeframe that lets you select Both what you accrued now and the amount overpaid, previously.
If you accidentally paid it outside of Payroll, then you would post that as Other Current Asset. Then later, you can show the earlier banking reduces what you owe; use Pay Liabilities, select what you owe. Click on the Expenses tab and put a Negative for the Other Current Asset and the amount you want to show is Applied now, hit Recalc and you have a Reduced Banking transaction, while showing you Paid Taxes for what you owed for that cycle, but the Banking is reduced.
If you got a Refund, you would Make Deposit to the same account you tracked it as overpayment; in my example, that would be "from" Other Current Asset.
There is no Payroll Adjustment to make. You never make a JE for anything to do with QB Payroll, either. That will make things Worse.
Thank you for responding. First let me say that I do not use Quick Books to do payroll. This issue has nothing to do with Payroll. Connecticut has a new Business Entity tax in 2018. We have never had this before. That being said, we paid an estimated amount at the end of 2018. Since then, our accountant has done our taxes and found that we over paid. We will apply this over payment to the next estimated payment which is due in March 2019. Instead of receiving an actual check and depositing it, we will just apply the over payment to the 2019 Qtr1 Estimated payment, making the payment less. We made another account in "Other Assets" labeled "Pre-paid Taxes" and the accountant will do a Journal Entry to manually fix it during this fiscal year. We were just trying to see if there was another way to do it. Unfortunately everyone is trying to make this a payroll tax or sales tax issue and it is neither of those. Appreciate the help, but we'll just fix it with a journal entry.
It helps to explain this Income Tax payment was not employee deductions. Only a C Corp pays its own income taxes, and that omission is helpful for perspective.
"That being said, we paid an estimated amount at the end of 2018."
Posted as Other Current Asset (prepaid expense). Once the Actual Amount is known, you rebalance this against Expense, and/or pay out the Rest. So, if you Overpaid, the entry for Debit Tax Expense and Credit Prepaid taxes, once the tax amount is Known, means you let the overpayment Ride as Prepaid, already.
"Since then, our accountant has done our taxes and found that we over paid. We will apply this over payment to the next estimated payment which is due in March 2019."
And that means you enter only the Next Amount as Prepaid; the overpayment is already sitting in Prepaid, carried over from the prior year. The Write Check is where you enter Prepaid Asset. That is the next banking event.
"Instead of receiving an actual check and depositing it, we will just apply the over payment to the 2019 Qtr1 Estimated payment, making the payment less."
Exactly. If you carry over $100, and owe $500, then your Next Prepayment Check is $400.
"We made another account in "Other Assets" labeled "Pre-paid Taxes" "
That's where it should have been, First. It isn't Expense when you Prepay Estimates. Change your First payment to flow differently.
"Unfortunately everyone is trying to make this a payroll tax or sales tax issue and it is neither of those."
Because you didn't give enough details in the beginning and we assumed you were asking about income tax Withholding.
Thank you for the help. I will make sure that I keep that in mind going forward. Appreciate the help. Just to be clear, I did clarify in the 1st response that it wasn't a payroll issue...but you are correct, I didn't initially say that, my error. Again, thank you for the help.