cancel
Showing results for 
Search instead for 
Did you mean: 
JoyceGTX
Level 3

Customer withheld tax when paying an invoice

We invoiced a customer in California for software services. When they sent a remittance, they withheld a portion of the amount for CA tax. The invoice was for $240K and they paid us $238,320. Now sure how to handle this. We will file a tax return in CA so the difference will be factored there. But how do I apply the payment and indicate the invoice is paid? Suggestions?

Solved
Best answer October 08, 2020

Best Answers
MirriamM
Moderator

Customer withheld tax when paying an invoice

Hi there, JoyceGTX.

 

I'd be happy to share information with you on how to handle customers withholding tax when paying an invoice. 

 

You'll need to create a withholding tax expense account and tax expense item to track the charges. Let me show you how:

 

To set up a withholding tax expense account:

  1. Click the Gear icon at the top.
  2. Choose Chart of Accounts.
  3. Tap the New button.
  4. From Account Type drop-down, pick Other Expense.
  5. From Detail Type drop-down, select Other Miscellaneous Expense.
  6. Name the account Withholding Tax Expense.
  7. Hit Save.

To set up a withholding tax expense item:

  1. Click the Gear icon at the top.
  2. Choose Products and Services.
  3. Tap the New button.
  4. Select Service.
  5. Name the item Withholding Tax.
  6. From Income account drop-down, select the withholding tax expense account that you’ve just created.
  7. Hit Save and close.

Then, you can use the credit note to charge off the withholding tax as an expense. Doing so will mark the invoice as paid in full. See this article for the detailed process (proceed to Step 3-4): How do I record tax withheld by my customer?.

 

You can also see this resource which you may find helpful: Record invoice payments in QuickBooks Online.

 

If there's anything else I can assist you with, in managing your QuickBooks account, feel free to leave a comment below. I'm always here to lend a hand.

 

 

 

**Say "Thanks" by clicking the thumb icon in a post.

**Mark the post that answers your question by clicking on "Accept as solution".

View solution in original post

1 Comment 1
MirriamM
Moderator

Customer withheld tax when paying an invoice

Hi there, JoyceGTX.

 

I'd be happy to share information with you on how to handle customers withholding tax when paying an invoice. 

 

You'll need to create a withholding tax expense account and tax expense item to track the charges. Let me show you how:

 

To set up a withholding tax expense account:

  1. Click the Gear icon at the top.
  2. Choose Chart of Accounts.
  3. Tap the New button.
  4. From Account Type drop-down, pick Other Expense.
  5. From Detail Type drop-down, select Other Miscellaneous Expense.
  6. Name the account Withholding Tax Expense.
  7. Hit Save.

To set up a withholding tax expense item:

  1. Click the Gear icon at the top.
  2. Choose Products and Services.
  3. Tap the New button.
  4. Select Service.
  5. Name the item Withholding Tax.
  6. From Income account drop-down, select the withholding tax expense account that you’ve just created.
  7. Hit Save and close.

Then, you can use the credit note to charge off the withholding tax as an expense. Doing so will mark the invoice as paid in full. See this article for the detailed process (proceed to Step 3-4): How do I record tax withheld by my customer?.

 

You can also see this resource which you may find helpful: Record invoice payments in QuickBooks Online.

 

If there's anything else I can assist you with, in managing your QuickBooks account, feel free to leave a comment below. I'm always here to lend a hand.

 

 

 

**Say "Thanks" by clicking the thumb icon in a post.

**Mark the post that answers your question by clicking on "Accept as solution".

View solution in original post

Need to get in touch?

Contact us
Sign in for the best experience
Ask questions, get answers, and join our large community of QuickBooks users.
Sign In / Sign Up