How to change sales tax reporting period WITHOUT affecting previous payment records?

Hello, mtic. 

Let me explain what happened to the payment made after the sales tax setting was changed from annually to quarterly.

When you modify your sales tax in QuickBooks, any changes made will directly impact the previous records associated with it. If you modify the sales tax rate or sales tax payment or change the tax agency, all previous transactions that used the old sales tax payment will be updated accordingly.  

To ensure that your financial records are accurate, two main options are available: a Tax Adjustment or a Journal entry.  

A Tax Adjustment is an accounting entry to correct errors or discrepancies in your tax records. For example, if you discovered that you made a mistake on your tax return and need to adjust the amount you owe, a Tax Adjustment would be appropriate. This accounting entry will adjust the balance in your tax liability account to reflect the correct amount owed. 
 

On the other hand, a Journal entry is an accounting transaction that can be used to record a wide variety of financial transactions, including adjustments to account balances, accruals, and other types of entries. Journal entries are typically used to ensure that your financial data is up-to-date and accurately reflects all relevant transactions. 
 

Before performing these steps, I suggest reaching out to your accountant. They can guide you through the proper accounting process to avoid issues with your accounts. If you do not have an accountant, you may find one through this link: Accounting professionals.

To begin, we need to create an account for adjusting sales tax. It's essential to choose the appropriate account type while adjusting sales tax. Set up an expense account to increase your sales tax due. On the other hand, if you need to decrease it, set up an income account.
 

Here's how:

1. Go to the Gear icon and select Chart of Accounts.
2. Tap New.
3. From the Account Type ▼ dropdown, select Income or Expenses.
   • If you need to decrease your sales tax due, set up an income account.
   • If you need to increase your sales tax due, set up an expense account.
4. Choose the account's Detail Type.
   • Use Sales of Product Income for an income account.
   • Use Taxes Paid for an expense account.
5. Name your adjustment account (for example, sales tax due increase).
6. Click Save.

Next, add an adjustment. Here's how:
 

1. Go to Taxes, then choose Sales tax.
2. Enter the date range in the Due Date Start and Due Date End ▼ dropdowns, then select Refresh.
3. Find the tax period you need to adjust, then select View Return.
4. Select Add an adjustment.
5. Choose the reason for the adjustment from the Reason ▼ dropdown menu.
6. Add an adjustment date.
7. Tap the account for adjusting sales tax from the Account ▼ dropdown menu.
   • Choose an expense account if you need to increase the tax due.
   • Choose an income account if you need to decrease the tax due.
8. Enter the adjustment amount.
9. Click Record Tax Payment.

For more detailed steps, check out this article: Create or delete a sales tax adjustment in QuickBooks Online. 

However, if you prefer to make a Journal entry, you can utilize this article for more detailed steps and processes: Create journal entries in QuickBooks Online.  

Lastly, you may also want to run a report to check how the changes will affect your current financial standing and adjust your budget accordingly: Run the Sales Tax Liability report. 

In case you need to record, adjust, and delete sales tax payments in the future, you can use this resource as a reference: Manage sales tax payments in QuickBooks Online. 

Please let me know in the comments if you need any help with anything other than recording your sales tax payment. I'm happy to assist you. Have a great day!

I have a similar issue and am not sure how to deal with it.

We have customers with jobs in multiple tax locations.   When I enter the correct tax rate for the customer, it always asks to change all the prior ones...   but I don't want to do that, just change the rate going forward, or perhaps use a different location.

HOW do I do this correctly?    I am worried if I hit the YES for past transactions by mistake, I will have a mess.   Why would anyone set up a program to change historical transactions?

Good day, cheriesontop.

I understand you'd like to update the tax rate for transactions moving forward without messing up the previous payment records. Let me share some clarification about the changes affecting historical transactions.

The prompt you received is needed due to some instances that require correction to include previous entries. However, I encountered a different one when replicating.

With this, I need additional information to provide a more accurate resolution. Are you using the manual sales tax? Can you share screenshots of the prompt where you have the Yes button? Would you mind sharing your screen? Please know that this will help me narrow down your concerns.

If you use manual sales tax, check if you can now switch over to automated sales tax. However, you won't be able to go back. Otherwise, it should be available to you soon if you don't have the option now.

Regarding your existing transactions, any previous ones that used the earlier tax rate will remain unchanged unless you edit them and select a different sales tax rate. That's why when editing custom rates from the Sales taxes after recording payments, there's a message that Changes you make will update the rates everywhere except for any past transactions. It means the modifications made will not impact your record or returns from the past.

Once you update the tax rate, it will show as inactive to your previous transactions. The system will automatically update its amount and create a credit to apply for the entry.

Here's an article for complete details: Edit sales tax rate in QuickBooks Online.

I'm adding this reference for your guide in adjusting sales tax payments: Manage sales tax payments in QuickBooks Online.

Feel free to get back to us anytime if you have further questions about sales taxes in the program. We're always available for you. Take care.

I took a screen shot (below).   This is from the Invoice screen.  It happens when a sales tax code is changed on an invoice.      Perhaps I have a setting wrong.  

However, if I only want to "make it permanent" going forward, for the future, how is that done?  

Which past entries would making a change like this affect?  

Help has arrived, @cheriesontop.

I'll join this thread and share some information about modifying your past transactions in QuickBooks Desktop.

To stop QuickBooks from updating names based on changes you make on transactions, we can change the preference for this. I'll show you how to do it: 

1. Go to the Edit menu, then choose Preferences.
2. From the General section, select Company Preferences.
3. Then, enable the Never update name information when saving transactions.

Moving forward those changes will be permanent.

If you encounter problems while working on your sales tax, please visit this resource: Resolve common sales tax issues.

I'm still ready to back you up if you need more help with taxes in QBDT. I'll keep the thread open so you can comment back. 

A simple check box and all issues appear to be solved.

Will test more extensively next week. 

Thank you so much !