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Mida Valo
Level 1

How to record an Invoice payment where customer pays a portion for tax?

I have invoiced my customer, for say $5000

They have paid me $4000 and paid $1000 on my behalf for taxes (NZ withholding tax for contractors)

 

How do I record in QBO that the full $5000 invoice is paid, even though I only received $4000 into my account?  When I try to enter it QBO says there's still $1000 unpaid.  How do I make it so that the full invoice is considered as being paid, I need to record that $1000 going to tax from that same payment somehow.

 

EDIT

I guess it would be the opposite side of this kind of transaction mentioned in this post - Solved: How to record and pay withholding tax on supplier'... (intuit.com)

 

Thanks

Solved
Best answer July 31, 2021

Best Answers
Rubielyn_J
QuickBooks Team

How to record an Invoice payment where customer pays a portion for tax?

I'll be glad to help you record an invoice payment where the customer pays a portion for the tax, @Mida Valo.

 

If your customer pays their invoice but withholds tax, use a credit note to charge off the withholding tax as an expense. Doing so will mark the invoice as paid in full.

 

To begin, set up a withholding tax expense account:

  1. Go to the Gear icon, and choose Chart of Accounts.
  2. Click New.
  3. From the Account Type drop-down, select Other Expense.
  4. From the Detail Type drop-down, choose Other Miscellaneous Expense.
  5. Name the account Withholding Tax Expense.
  6. Once done, click Save.

 

Then, set up the withholding tax expense item:

  1. Select the Gear menu, and choose Products and Services.
  2. Click New, then select Service.
  3. Name the item Withholding Tax.
  4. From the Income account drop-down, choose the withholding tax expense account that you created.
  5. Once done, click Save and close.

 

Then, proceed to Steps 3 and 4 in this article to complete the process: How do I record tax withheld by my customer?.

 

I'm also adding this resource to help you manage invoice fees in QuickBooks: Record invoice payments in QuickBooks Online.

 

Keep in touch if you have other questions about handling invoices in QuickBooks. I'll be happy to lend a helping hand. Stay safe always.

 

View solution in original post

2 Comments 2
Rubielyn_J
QuickBooks Team

How to record an Invoice payment where customer pays a portion for tax?

I'll be glad to help you record an invoice payment where the customer pays a portion for the tax, @Mida Valo.

 

If your customer pays their invoice but withholds tax, use a credit note to charge off the withholding tax as an expense. Doing so will mark the invoice as paid in full.

 

To begin, set up a withholding tax expense account:

  1. Go to the Gear icon, and choose Chart of Accounts.
  2. Click New.
  3. From the Account Type drop-down, select Other Expense.
  4. From the Detail Type drop-down, choose Other Miscellaneous Expense.
  5. Name the account Withholding Tax Expense.
  6. Once done, click Save.

 

Then, set up the withholding tax expense item:

  1. Select the Gear menu, and choose Products and Services.
  2. Click New, then select Service.
  3. Name the item Withholding Tax.
  4. From the Income account drop-down, choose the withholding tax expense account that you created.
  5. Once done, click Save and close.

 

Then, proceed to Steps 3 and 4 in this article to complete the process: How do I record tax withheld by my customer?.

 

I'm also adding this resource to help you manage invoice fees in QuickBooks: Record invoice payments in QuickBooks Online.

 

Keep in touch if you have other questions about handling invoices in QuickBooks. I'll be happy to lend a helping hand. Stay safe always.

 

View solution in original post

Mida Valo
Level 1

How to record an Invoice payment where customer pays a portion for tax?

This works perfectly for my needs, thank you!