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Need help categorizing payments that are not deductible

 
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Re: Need help categorizing payments that are not deductible

Add an expense account and call it Non Deductible Expenses and when you transfer numbers from qb to your tax return exclude these. They are still part of your P&L as you would submit to other than tax entities.

 

I will give youna real world example from our business. Some lenders have required we maintain life insurance to cover the loan. Life insurance proceeds are not taxable and so premiums, whikema valid business expense, are not deductible for taxable net profit.

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Re: Need help categorizing payments that are not deductible

thanks but how does this affect the Retained Earnings account on the books? if at all

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Re: Need help categorizing payments that are not deductible

Allow me to step in, lawsonmoea.

 

Yes. In addition to john-pero's advice, retained earnings are affected by increases or decreases in net income and dividends paid to your shareholders. 

 

This guide to Retained Earnings has outlined the most importing things you need to know:

Keep me posted if you have further questions. I'll be here to answer them. Take care.

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Re: Need help categorizing payments that are not deductible

Non-deductible expenses essentially increase net income - or fail to reduce net income as it may be. Hence non-deductible expenses will increase retained earnings compared to a situation where the same amount of deductions are deductible/ What you do with retained earnings is a separate situation and is not reflected by or reflective of net taxable income.

 

A corporation can entertain a look back for a closed year for the taxes they pay on last year's income, as I understand it. About the only time a company can include a current payment in a previous year set of books.

 

Corporations, at least so far in America, cannot take a deduction or expense for dividend distribution which leads to double taxation on what is paid out to shareholders. Taxed at the corporate level and taxed again against the recipient level. Don't hold your breathe waiting fro Congress to "fix" this double dip by the IRS

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