Sales tax Report Includes bad debt

Tiffiny Taylor Krugh · ‎December 30, 2019

I created a JE to write off some bad debt, because the invoices apparently are now considered "paid" they are appearing on my Sales Tax Payable Report.

I'm assuming I don't use sales tax for services I was unable to collect on. Is there anyway to have them not shown on the reporting?

MikiD · ‎December 30, 2019

You might want to consider removing the taxable option on the invoice , Tiffiny Taylor Krugh.

By doing this, the transaction won't acquire any sale tax information.

Please make sure to delete the write off you've created before changing the invoice, then create it again. Also, it would be best to consult your accountant before doing this procedure.

Lastly, here's an article with detailed steps of writing off a bad debt in QBO: Uncollectable Invoices.

Let me know if there's anything else i can help you about QuckBooks.

View solution in original post

JKCEnt · ‎October 29, 2020

This is a work around not a solution. There is a problem within Quickbooks that is showing the invoice as being paid when it is written off, which is why the amount appears on the sales tax. Going back in and un checking the taxable box still causes the invoice to be on the sales tax report, but now it appears in non-taxable sales. That helps us not pay tax on the written off amount, but it would be suspicious in an audit, I think. Non-taxable sales are supposed to have a sales tax exemption form for that customer or be a qualified utility. This needs to get fixed in Quickbooks.

View solution in original post

MikiD · ‎December 30, 2019

You might want to consider removing the taxable option on the invoice , Tiffiny Taylor Krugh.

By doing this, the transaction won't acquire any sale tax information.

Please make sure to delete the write off you've created before changing the invoice, then create it again. Also, it would be best to consult your accountant before doing this procedure.

Lastly, here's an article with detailed steps of writing off a bad debt in QBO: Uncollectable Invoices.

Let me know if there's anything else i can help you about QuckBooks.

Tiffiny Taylor Krugh · ‎December 30, 2019

Understood, thank you for the suggestion.

JKCEnt · ‎October 29, 2020

This is a work around not a solution. There is a problem within Quickbooks that is showing the invoice as being paid when it is written off, which is why the amount appears on the sales tax. Going back in and un checking the taxable box still causes the invoice to be on the sales tax report, but now it appears in non-taxable sales. That helps us not pay tax on the written off amount, but it would be suspicious in an audit, I think. Non-taxable sales are supposed to have a sales tax exemption form for that customer or be a qualified utility. This needs to get fixed in Quickbooks.

MaryLandT · ‎October 29, 2020

Hi there, JKCEnt,

Allow me to step in and share additional insights about your Sales tax report that includes bad debt.

Using a credit note is the only to adjust your sales tas payable. It puts the unpaid portion to the expense account to record a negative sales tax.

As mentioned above, you can uncheck the taxable item of the invoice. Then, delete and re-create the credit note, and apply it again to the invoice. The uncollectible receivable will appear on your Profit and Loss report under the Bad Debts expense account.

You can check again this link for the instructions and detailed steps: Write off bad debt in QuickBooks Online.

On the other hand, I recommend consulting with your accountant for assistance if you're unsure of the workaround we've provided in this thread. Doing this will help ensure you have accurate records of your books.

Please stay in touch if you have any other sales tax concerns. I'll be right here to help you.

JKCEnt · ‎October 29, 2020

Oh I think I see, I have been making the credit memo untaxable because I don't know what the subtotal of the invoice is and also trying to keep the whole thing off the sales tax table. I just tested what you said and I think it worked but I did not have to delete the credit memo or mark the invoice untaxable.

The credit memo has to be entered to match the original invoice items and then kept as taxable. Then the invoice shows up on the sales tax as a positive entry followed by a negative entry for the same amount, therefore making the sales tax due zero.

Either way it is a pain since you have to either go copy the item amounts from the original invoice or you have to do the other suggestion of unchecking the taxable box and deleting or making the memo untaxable.

Why doesn't the "write off the extra amount" option in the receive payments window do a similar thing? That is so much easier to do and was the way I was doing it before but then discovered I was paying the tax on the amount written off.