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IHaveSomeQuestions
Level 1

How to record a federal tax refund from overpaid estimated quarterly taxes?

Hello!

 

I overpaid my estimated quarterly taxes in year 2019. In March of 2020, I received a refund as a direct deposit from the IRS directly into my business checking account (the account I pay from). The business is a passthrough LLC as far as the IRS is concerned and I log my books by cash basis. This is not a refund of payroll taxes, but instead federal income tax which QB calculated for me each quarter.

 

My question: What is the correct way to log this entry in QuickBooks Self-Employed? Do I log it as Business -> "Federal Tax" (a positive amount), or would this be considered Personal -> "Income" or even "Personal Deposit" since it was added to my business checking?

 

I guess what's confusing me is whether or not QB records paid quarterly taxes as an expense on the books, or is it simply keeping track of that amount (not as a logged expense) when it comes time to file. Either way, I want to make sure things balance out correctly and that I don't include it as "income" if it should be recorded otherwise.

 

Any clarification or insight is appreciated! Thanks!

2 Comments 2
Joesem M
Moderator

How to record a federal tax refund from overpaid estimated quarterly taxes?

I appreciate you for sharing detailed information about your concern, @IHaveSomeQuestions.

 

You can record the Federal Tax refund as Business and manually assign its category as these are both company expenses. I'll guide you how. 

 

  1. Go to the Transactions menu.
  2. Click Add transaction.
  3. Enter the transaction in the box and the amount.
  4. Select Business for a tax refund.
  5. Verify the details and click Save.

 

You can run the Tax Summary or Tax Detail report to review your tax activities and information. To do that, just go to Reports and select either one of the reports mentioned. Choose a tax year and click View.

 

Upon sharing the steps above, I'd still suggest contacting your accountant. They can guide you with the process to ensure your books are accurate. You can also find one by checking out this article: Find an accountant or bookkeeper.

 

Let me add these resources to learn more about handling your taxes in QBSE:

 

 

If there's anything else that I can help you with, please let me know by leaving a comment below. I'll be here to lend a hand. Have a good day.

 

 

IHaveSomeQuestions
Level 1

How to record a federal tax refund from overpaid estimated quarterly taxes?

Thanks for your response and help, @Joesem M .

 

I guess I should have phrased my question differently:

 

Does the QB software record quarterly estimated federal taxes as an expense when logged, or is that number only stored in the "taxes" section for future reference when filing my taxes?

 

As a test, I logged an expense of $1000 and categorized it as "Business: Estimated Federal Taxes". In doing so, my account does reflect this amount as "paid" within the taxes section of QB Self-Employed. It also shows properly in the list of transactions. But, I do not see this reflected in my account overview sections: "Profit and Loss" nor "Expenses".

 

I'm assuming that QB does not include any paid estimated taxes in any calculations of profit, loss, or expenses. I guess this would make sense, as it's ultimately an "estimated" pre-payment that one would be making to the government come April 15th - it just becomes confusing as it's made in advanced quarterly payments (of which, might have been over or under paid). I just wanted to confirm how QB calculates this and share these findings in case anyone else runs into the same situation and finds this helpful.

 

My main concern was whether my actual income calculated by QB (and then filed with the IRS) included my estimated payments. If it did, I assuming I would have to log the refunded amount as "income" in the current year to offset the deducted amount from the previous tax year. Since it seems QB does not include it, I would simply exclude the refund as it was already seen as earned (and taxed) in the prior year.

 

Again, I'm no tax professional, and I realize QB support can only provide help to a certain extent. So if anyone else happens to have any expertise or thoughts on the matter, feel free to share them here.

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