Top 5 Questions- Year End Paying Taxes

Hey there! Get ready for another exciting round of our Top 5 questions series. This time, we're diving into the world of Paying Taxes. If you've ever wondered how to fix incorrect sales tax, how to go about adding a new location that's not in your state, or how to enter your sales tax, then this one is for you. 

So keep on scrolling below! 

1. Sales Taxes is incorrect in my QuickBooks Online account, how do I fix this?

Let’s take a look at what could be going on!

QuickBooks Online automatically calculates the total sales tax rate based on your customer's sales tax-exempt status, the location where you sell/where you ship, and your service or product's sales tax category. The total sales tax rates are the sum of state rates and local rates, including the city, county, and/or district rates.

We can create a sales tax adjustment to record credit to match the sales tax payment. To do this,  you'll need to create an account for the adjustment. 

You can set up an income account if you want to decrease the amount due, or an expense account if you need to increase the sales tax due. I'd also suggest consulting an accountant to choose the appropriate account and detail types. 

Once verified, you can follow these steps below:

1. Go to the Gear icon, then Chart of accounts.
2. Click on New.
3. Choose Income or Expense from the Account Type drop-down.
4. Select the account's Detail Type.
5. Name your adjustment account.
6. Click on Save and Close.

Then go to the Sales Tax tab to add an adjustment. Here's how:

1. Go to Taxes from the left menu, then the Sales Tax tab.
2. Locate the tax period you need to adjust and hit View return.
3. Tap Add an adjustment.
4. Select the Reason for the adjustment.
5. Choose the Account for adjusting sales tax.
6. Enter the adjustment amount.
7. Click Add.

Here's an article for the detailed instructions: Create or delete a sales tax adjustment in QuickBooks Online.

I'm also adding this link in case you need help managing sales tax. It contains topics with articles to guide you along: Manage taxes in QuickBooks.

2. Should I enter my sales tax as an expense every time I pay it or is that automatically figured into ...

Thank for asking!

When you charge your customers sales tax, it posts to the Sales Tax Liability account (as a credit) in your chart of accounts. When you pay the collected tax to your state revenue department, you would post that payment to the same Sales Tax Liability account (as a debit) to reduce your liability. 

Generally, the sales taxes would not go through your P&L.  Now if you are talking about sales taxes you pay on purchases, then in that case, I would post the taxes to the same expense account as the purchase. In other words, if you purchased office supplies on which sales taxes were charged, the entire amount including sales taxes paid would be posted to office supplies. Make sense?

3. I recently switched to QB Online from Desktop and I'm trying to submit my Sales and Use Tax Return. ...

I’ll help you out!

I see the importance of running one report with all the information you need to file your tax return easily. Let me share how to generate a report that contains your total sales, non-taxable sales, taxable sales, tax collected, and sales tax payable.

To print a report that contains those details, you'll need to run the Sales Tax Liability Report. Here's how:

1. Go to Reports.
2. Search for "Sales Tax Liability Report" in the search bar.
3. Select the correct date range depending on how often you file your tax.
4. Select the Tax Agency dropdown. Then, select All or just one tax agency.

From there, you can view your total sales in the Gross Total column. Additionally, under the Tax Amount column, you can see the total tax amounts you collected from your customers. 

Under the Non-taxable and Taxable Amount columns, you can find your non-taxable and taxable sales amounts. Also, your collected tax should be under the Tax Amount column.

Lastly, you can select any tax amount to open a transaction report. This way, you can see how much tax you charge for each sale. 

I'm leaving this article with more information on using the Sales Tax Liability Report in QuickBooks: Check how much sales tax you owe in QuickBooks Online.

For future reference, here's an article about filing your tax return and recording your payment: File your sales tax return and record sales tax payments in QuickBooks Online.

4. Quickbooks is not calculating or withholding any money from my employee’s paycheck nor paying any ta...

Let's take a look into why your payroll taxes aren't calculated.

Federal taxes are calculated based on the details from an employee's profile. For the federal withholding taxes, QuickBooks calculates them based on the following elements:

• Taxable wages
• Number of allowances/dependents
• Pay frequency
• Filing status

It's also possible that you've set the employee to Do Not Withhold for federal and state income taxes in the employee setup. We'll go ahead and check them out.

1. Go to the Payroll menu and select Employees.
2. Click the name of the employee, then click the Pencil icon beside Pay.
3. Go to Step 2 or the part where the employee's withholding or W4 are set up, then click the Pencil icon underneath it.
4. Review the details and make sure all information is correct.
5. Click Done.

If the issue persists, I suggest contacting our Customer Care Team. They can take a closer look at this to determine why the federal taxes are not calculated. Here's how:

1. Click the Help menu in the upper-right-hand corner of your QBO account.
2. Type in "Talk to a human" in the chat box, then press Enter.
3. Select Get help from a human.
4. Click Chat with us or Have us call you.

I've included this article for more insights into configuring reports and creating a custom payroll report in QuickBooks:

• Customize reports in QuickBooks Online.
• Run Payroll Reports
• Payroll Tax Compliance Links

5. How do I record an income tax returns refund in quick books?

I’ll share some information about recording income tax paid in QuickBooks.

To start out with, you will need to record your income tax payments in QuickBooks.

If you choose to put it into the business, then the source account for the deposit would be owner/partner equity investment. But if not, you can enter it as a personal expense. For more information on how to account the tax payments in your tax reporting, I’d recommend consulting an accountant to make sure it's recorded correctly.

If you're using QuickBooks Online Self-Employed, it tracks your tax payments automatically if you pay it online. If you're using QBO, you need to record it manually. The following article contains the step-by-step process: Write checks. 

That concludes today’s Top 5 Year End paying taxes questions. I hope you found these helpful and got some valuable resources out of it. As always, if you have any other questions or concerns, please feel free to ask us here in the Community.  

We will be back with more questions on this topic next month so make sure to keep an eye out!