If you are paying a tax bill enter the transaction as a Purchase. If you are receiving a tax refund enter it as a Sale. Use the Service type of Purchase or Sale. We will use an example to demonstrate one method for capturing Tax transactions. Example:
You have prepared your Tax Remittance and as a result you established you obligations for the period concerned to be:
- Collected 1,000 in Consumption tax
- Withheld 2,000 in Employee wages and salaries related tax
- Entitled to a Tax Credit of 500 for expense you made.
Note: Net you owe the Tax Authority in your country [ 1,000 + 2,000 – 500 ] = [ 2,500 ]
- From the main menu select the + icon next to Purchase. This will bring up the Add Purchase screen.
- In the Add Purchase screen, [Service] and [Invoice] will already be selected from the picklists.
- Enter the Date to be the date that you worked out your BAS obligations.
- The Invoice# number can be set to whatever is meaningful for you. An example might be ” IRS-FY2012-Jan”.
- The Purchase Order# number can be set to be the Tax Authority document ID found on your Tax form as an example or left blank.
- The Contact can be set to the name of your Tax Authority.
- The Due Date is the date your Tax Remittance form and payment is due to be remitted.
- For the invoice items (Account, Tax Code, Amount):
Account Tax Code Amount Liability: Tax Collected from Sales 1,000 Liability: Employee Tax Payable/Collected 2,000 Asset: Tax Paid on Purchases * -500 Total Amount 2,500
* Negative Amount for refund item
If you can’t see the tax and payroll accounts mentioned above, go to Settings > Accounts List, and tick both payroll and tax accounts checkboxes.
- If you are paying the transaction now online or otherwise you can apply a payment to the invoice by clicking the Save button which will make the Apply Payment button available. Otherwise use the Quick Payment section to complete the transaction. If you plan to make payment at a later time click the Save and Close button to leave the transaction unpaid.
You can also enter tax transactions using the Journal screen. However, using the Purchase and/or Sale screens to do this allows you to attach the Tax Authority as the contact to the transaction. This then also allows for easier tracking of transaction history with the Tax Authority by you and your accountant in the future.