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Intuit

How to correct miscalculated sales tax transactions in QuickBooks Online

Learn what to do if you recently got an email about sales tax issues in QuickBooks Online.

If you got an email from Intuit titled "Action required: Recent transactions may have incorrect sales tax" or saw this link in the Sales Tax Center, don't worry.

Sales

You need to refresh the automatic sales tax calculations for specific transactions listed in your email or Sales Tax Center. The miscalculation issue affected a small number of transactions modified between April 19, 2020 and May 5, 2020. It only affects a small number of QuickBooks Online users. Here's how to fix the accounting for those transactions.

Important: This issue only affects a small number of users in QuickBooks Online. Only follow these steps if you received the email letting you know there was an issue or saw the link in-product. Don't follow these steps otherwise. If you're aware of the issue and already adjusted the transactions to handle the accounting your way, you don't need to follow these steps.

Step 1: Recalculate affected transactions

Let's recalculate the sales taxes for the affected transactions. The list of affected transactions is in the "Action required: Recent transactions may have incorrect sales tax" email we sent you:

  1. Sign in to QuickBooks Online.
  2. Open the email we sent to get the transaction list. If you can't find the email, go to the Sales Tax Center in QuickBooks.
  3. Follow the links in the email to review each transaction.

Review all the transactions on the list. Follow the next few sections to review unpaid invoices, paid invoices, and sales receipts.

Important: You're required by law to either refund customers for any sales tax they paid over the amount shown after recalculating your transactions, or pay the additional taxes collected to the tax agency that processed, or will process, your tax return.

All you have to do for unpaid invoices is update the sales tax calculation:

  1. Open the unpaid invoice.
  2. On the form in the tax section, select the See the math link. This automatically recalculates the sales tax.
  3. Select Save to save the transaction.

QuickBooks sends the updated sales tax amount to your customer. They can now pay you the correct amount.

Check to see if your customer overpaid or underpaid the sales tax:

  1. Open the paid invoice.
  2. Note the current invoice total.
  3. On the form in the tax section, select the See the math link. This recalculates the sales tax.
  4. Reapply any relevant tax overrides and manually adjust the tax amount if you decide you need a different rate. Note: If you changed an affected line item on an invoice from taxable to nontaxable or vice versa after you sent it, take note. Make sure you calculate the sales tax appropriately based on what you need for that item.
  5. Write down the difference between the original total and the new total.

If the invoice total doesn't change, or you manually adjusted the rate, you don't need to do anything. The sales tax is settled for that invoice.

If the invoice total increased or decreased, here's what to do:

If the new total is more than the original, that means the sales tax went up. Your customer underpaid the sales tax.

For eligible transactions, we sent you a credit to cover this underpayment. You don't need to ask your customer to pay for the sales tax difference. To correct the accounting on the existing invoice, add the credit we gave to it. First, create an item for the sales tax credit we gave you:

  1. Go to the Sales menu and select the Products and services tab.
  2. Select New and create a Service item.
  3. Name the service "Credit QuickBooks gave to me for sales tax."
  4. In the Sales tax category dropdown, select Nontaxable.
  5. In the Income account dropdown, select + Add new. You'll create a new account to track this specific credit item.
  6. In the Account type and Detail type dropdowns, select Other current assets.
  7. Name the account "Credit from Intuit - Sales tax difference."
  8. Select Save and close to create the item.

You have a service item for the sales tax credit we gave you. It's tied to a specific account so you can track it. Now you can add the tax credit item to any invoices your customers underpaid sales tax on.

  1. Open an existing invoice that the customer underpaid sales tax on.
  2. In the Product/Service dropdown, select the "Credit QuickBooks gave to me for sales tax" item.
  3. In the Amount column, enter the amount they underpaid as a negative number. This applies the credit amount we gave you to cover for the customer underpayment.
  4. Select Save to save the invoice.

This settles the underpayment difference for the paid invoice.

If the new total is less than the original, meaning the sales tax went down, your customer overpaid. You have a few options:

Give your customer a credit for future purchases

  1. Open the paid invoice.
  2. On the form in the tax section, select the See the math link. This automatically recalculates the sales tax.
  3. Select Save to save the invoice.

QuickBooks will ask if you want to create the credit for the customer when you save. This is the easiest way to handle the overpayment.

Give your customer a refund

If your customer doesn't want a credit, you can give them back the money. Create an expense (or a check) to handle the accounting:

  1. Select New + and then Expense, or Check if you got a check.
  2. In the Payee dropdown, select the customer.
  3. In the Category column, select Accounts Receivable (A/R).
  4. In the Amount column, enter the amount they overpaid.
  5. Select Save and close to save the expense.

This balances out the overpayment balance. Everything should be settled.

Check to see if your customer overpaid or underpaid the sales tax:

  1. Open the sales receipt.
  2. Note the current sales receipt total.
  3. On the form in the tax section, select the See the math link. This automatically recalculates the sales tax.
  4. Reapply any relevant tax overrides and manually adjust the tax amount if you decide you need a different rate. Note: If you changed the affected line item on an invoice from taxable to nontaxable or vice versa after you sent it, take note. Make sure you calculate the sales tax appropriately based on what you need for that item.
  5. Write down the difference between the original total and the new total.

If the sales receipt total doesn't change, or you manually adjusted the rate, you don't need to do anything. The sales tax is settled for that sales receipt.

If the total increased or decreased, here's what to do:

If the new total is more than the original total, it means the sales tax amount went up. Your customer underpaid the sales tax.

For eligible transactions, we sent you a credit to cover this underpayment. You don't need to ask your customer to pay for the sales tax difference. To correct the accounting on the existing sales receipt, add the credit we gave to it. First, create an item for the sales tax credit we gave you:

  1. Go to the Sales menu and select the Products and services tab.
  2. Select New and create a Service item.
  3. Name the service "Credit QuickBooks gave to me for sales tax."
  4. In the Sales tax category dropdown, select Nontaxable.
  5. In the Income account dropdown, select + Add new. You'll create a new account to track this specific credit item.
  6. In the Account type and Detail type dropdowns, select Other current assets.
  7. Name the account "Credit from Intuit - Sales tax difference."
  8. Select Save and close to create the item.

You have a service item for the sales tax credit we gave you. It's tied to a specific account so you can track it. Now you can add the tax credit item to any sales receipts your customers underpaid sales tax on.

  1. Open an existing sales receipt the customer underpaid sales tax on.
  2. In the Product/Service dropdown, select the "Credit QuickBooks gave to me for sales tax" item.
  3. In the Amount column, enter the amount they underpaid as a negative number. This applies the credit amount we gave you to cover for the customer underpayment.
  4. Select Save to save the sales receipt.

This settles the underpayment difference for the sales receipt.

If the new total is less than the original, it means the sales tax went down. Your customer overpaid the sales tax.

Create a credit memo to handle the accounting. First, create a credit item to give your customers. Note that this item is separate from the credit we gave you for underpayments.

  1. Go to the Sales menu and select the Products and services tab.
  2. Select New and create a Service item.
  3. Name the service item "Owed to customer for ST issue."
  4. In the Sales tax category dropdown, select Nontaxable.
  5. In the Income account dropdown, select + Add new. You'll create a new account to track this specific amount.
  6. In the Account type and Detail type dropdowns, select Other current assets.
  7. Name the account "Due to customer - Sales tax difference."
  8. Select Save and close to create the credit item.

You now have a credit item that tracks what you owe to customers as credits. Next, update the original sales receipt:

  1. Open an existing sales receipt your customer overpaid sales tax for.
  2. In the Product/Service dropdown, select the "Owed to customer for ST error" item you just created.
  3. In the Amount column, enter the amount they overpaid.
  4. Select Save to save the sales receipt.

Now you can give the customer a credit for their overpayment:

  1. Select New and then Credit memo.
  2. In the Customer dropdown, select the customer you want to give credit to.
  3. In the Product/Service dropdown, select the "Owed to customer for ST error" item.
  4. In the Amount column, enter the amount they overpaid.
  5. Select Save and send.

This balances out the original sales receipt and the overpayment. Your customer can use this credit for future purchases.

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