how to handle a pass thru expense

kb111 · ‎April 07, 2020

We received a check that we deposited into our account from our accountant for a penalty we incurred for late payments. Since it was her mistake, she paid us the full amount of the penalty. I now plan to write a check to send out the penalty to the company to whom we owe the penalty.

What categories should I use, or how should I enter it so that it basically shows up as a wash or pass thru type item. I don't think the payment should count against our expenses but not exactly sure how to make that happen. I wasn't sure if I needed to do anything special? Or can I just deposit the money into the category/account involved and then pay out the amount using the same category/account?

Thanks in advance!

john-pero · ‎April 07, 2020

Use the same account for both and it will be a wash as it should be. Certain penalties (like to government agencies) are not deductible in any event. If you ever might have non-ductible expense of your own you may wish to set up an expense account called "Non-Deductible Expenses", Any actual expenses will show on your P&L but your tax CPA will know to remove them prior to tax filing (in fact if you map accounts to tax forms this account would not be mapped)

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john-pero · ‎April 07, 2020

Use the same account for both and it will be a wash as it should be. Certain penalties (like to government agencies) are not deductible in any event. If you ever might have non-ductible expense of your own you may wish to set up an expense account called "Non-Deductible Expenses", Any actual expenses will show on your P&L but your tax CPA will know to remove them prior to tax filing (in fact if you map accounts to tax forms this account would not be mapped)

kb111 · ‎April 07, 2020

Thank you. It worked perfectly.

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how to handle a pass thru expense