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Kelsey1990
Level 2
posted
‎May 02, 2024 02:10 PM
last updated ‎May 02, 2024 2:10 PM

Income Tax - Categorizing Accurately

I want to accurately record CRA income tax payments from my bank register to reflect the type of payment made ie income tax payable, income tax deferred, income tax expense, current assets (tax payments), current liabilities (tax payments) etc but need a better understanding of the types of income tax accounts. Examples, categorize the following:

a) Income tax paid in the current fiscal year for the previous fiscal year (Federal income tax expense - "other expense"?)

b) Quarterly income tax installments paid in the current fiscal year for the current fiscal year but not due technically until the next fiscal year (deferred taxes- liability or asset? )

c) Quarterly income tax installments to be payed/ expected to be payed by the government - scheduled but not yet payed (Taxes payable- liability? Current or Long term? )

c) Accountant estimated taxes owed & payed prior to receving the actual CRA NOA actual income tax owed

amount (current asset -taxes paid?)

d) Income tax payment rebates or refunds for overpayment from previous year recevied in current fiscal year???

 

 

I am shocked that Quickbooks has a payroll/sales tax set up but nothing for year end income tax tracking. Especially when searching this topic. It seems like there are many users who are facing the same issue.

d) Actual income tax amount per the CRA NOA to be payed/payed (Income tax expense account? Create a bill then pay? Journal entry as credit/debit?)

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2 Comments 2
Henock K
QuickBooks Team
QuickBooks Team
‎May 02, 2024 02:50 PM

Income Tax - Categorizing Accurately

Hi Kelsey1990,

Welcome to the Community. It's important to record your income tax payments correctly to ensure your books balance. QuickBooks Online Payroll is a great program that gives you the ability to pay your employees and track your payroll remittances. I'd be glad to help.

Based on what you've described, I encourage you to reach out to an accountant. They'll guide you in creating the accounts you need in the chart of accounts to correctly record your income tax payments. If you don't have an accountant, you can find one near you by clicking on My Accountant on the left navigation menu> and then Find a pro to help.

 

If you have any other questions, feel free to reach out here.

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Kelsey1990
Level 2
‎May 02, 2024 09:03 PM

Income Tax - Categorizing Accurately

Hi Henock K,

I appreciate your response however my issue is not with payroll or sales tax. Quickbooks did a great job setting that up. However, they lack direction for non accountants as to how to best categorize and handle income tax. It seems many from the quickbooks community have asked this same question and always get the same feedback to inquire with their accountant. I just want to be better educated as to the difference of deferred tax vs income tax expense vs income tax payable so as to understand how to best treat my income tax payments.

 

Example, I payed my quarterly income tax instalment for March 2024. It is not technically due until April 2025. It seems I can class as a deferred payment but also as a current asset but is technically overall a liability. Once the total Incone tax return at year end is filed & payed the payments obviously move accounts to an income tax expense but because I can't claim as an actual "expense" on my profit loss because it's tax being payed on my income, it can't be classed an actual "expense" but would rather be a long term asset? and no longer a liability (tax payable liability)? 

.... I just need direction as to the stages of income tax and where to categorize in the chart of accounts. A income tax glossary of terms if you will in better detail than the basic "taxes payable with in 12 months" or "taxes due to be payed in the future". 

 

I feel like Quickbooks should have this set up so when transactions are pulled from the register they can more easily be classified without having to consult an accountant. Although I do have an accountant, but they work for a large firm, change annually and there is no correspondence  in between the early tax call and the year end tax return. I have highered a bookkeeper to consult but she is retiring & only comes to help quarterly. Many are also not familiar with quickbooks and are more familiar with Sage. 

* Also did the find a pro and non for my area 

* Also chatted with Quickbooks & advised of same to consult an accountant as they are not allowed to provide direction ... they ya just a matter of helping confirm the definition of the accounting terminology so to best understand how to use it ..

 

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