How to handle sales tax returns and refunds from your government
System
Posts: 412 admin
How to handle sales tax returns and refunds from your government
Attention: This FAQ does not apply to all businesses. Please consult a tax professional to learn more about what your business can claim and about which sales taxes are recoverable taxes.
Depending...
0
Comments
My challenge is calculating GST for the quarter when the payment or refund was recorded within that quarter from the previous quarter.
For example, say 2nd quarter we owed $200 in GST but the payment was in the first month of 3rd quarter. Now, when I calculate the GST for 3rd quarter, I need to move the journal transaction temporarily to the previous quarter to get a proper tax calculation.
What am I doing wrong as I shouldn't need to move journal transactions around like this?
Thanks.
Hi @edival, it sounds like you are constraining the date range to the current quarter when accessing the Sales Tax Report.
If you are always paying off your tax liabilities in full, you should be able to expand your date range for the Sales Tax Report to view more accurate numbers.
For example, let's say you owed $200 in Q2. Your tax liability balance is now $200. Next, let's say you collect more tax in the first month of Q3 for the amount of $150. Your tax liability is now $350. Finally let's say you pay off Q2's liability of $200. Your new liability balance is now $150. This would be what you see on the report if you make sure your report includes all dates prior.
If you constrain the report to show only the dates in Q3, Wave has no choice but to ignore the initial balance incurred from Q2.
Hi @Erik, that's the challenge. Especially if I do that when the new year comes around so if we owed $5000 for 2017 and we pay in the 1st month of 2018, then it will show as a negative for 2018 because it's applying the payment for 2017 there unless we move the date of that transaction to the last day of the previous month while we calculate the tax.
This is an ongoing frustration with my bookkeeper and myself
Hi @edival. This would be the current workaround for this (adjusting the date range for your tax payment if you want it to show up in the fiscal year). With that being said, this is something that could be implemented and altered in the future, but currently no timetable for this.
How should I account for mismatches between what Wave calculates my tax liability to be and what the actual liability is. For example, if I have HST liability of $1000 (i.e. HST Payable = $1000), but have an additional $50 of penalties - how can I account for that?
I received a (small) credit from the state for "early filing". How is this to be accounted for so that sales taxes due as calculated by Wave is reduced to what I actually had to pay?
How can i add sales tax to the end of the invoice to all items? I can only see the option item by item.
If i have an invoice with 100 items sold, i cannot add a one time Tax?!
The screenshots in this tutorial look completely different from the version of Wave available to me in January 2019. Is there an update out?
@d_g_1 Technically, a penalty for a late payment for Sales Tax is no longer a Sales Tax Liability -- my suggestion is that you create a separate liability account solely for the purpose of that particular penalty and track it that way.
@RCraigB In this case, all you would need to do is make sure that you are reducing the balance on the Sales Tax Payable account by creating a journal transaction showing that funds have been moved from Sales Tax Payable to your bank account (as a credit) -- and this will reduce the balance of that particular account, and increase your bank account balance.
@Carlos_A_Costa In the invoice section itself, there isn't a way to add a sales tax to the total invoice itself (it has to be per line item on the invoice). With that said, you can add a Sales Tax for a bulk deposit on the transactions page itself if this needs to be accounted for.
@ovhenderson One of our highest priorities right now is moving all of our users over to our latest software as soon as possible -- we still do not have an ETA of when this will be completed for everyone, but I can definitely say it's going to be happening soon.
I am trying to enter my remittance to the Receiver General for the 4Q HST. It will not let me access HST in the bill setting, so I can show this as a payable in 2018 year end (which I could do previously be adjusting HST payable and receivable and write my cheque accordingly) How do I do this? Why do you no longer have phone help desk?
I reported $246.60 collection of sales tax, paid in a timely manner. So the state gave a small discount of $1.23 at the time of payment for the timely payment. How do i account for that $1.23 as credit to the sales tax?
Hi @Helga. I believe that we spoke over a support ticket and we found a temporarily solution for your particular inquiry. We're hoping to have a more solid fix on this in the future, but we do not have any immediate plans currently in the works.
@Tag In terms of accounting for the credit, you will need to make sure that you create a Journal Transaction that debits the Sales Tax Payable account and credits your bank account. This will show that the funds for the tax payable were actually credited back to your bank account.
@edival I have exactly your problem, and I think @Erik didn't get what you meant.
Hi there. We charge tax on our sales and deduct the sales tax on our purchases. We do this every 2 months.
So far I have not included this information on wave.
For Jan-Feb I owed 10,000 in sales tax and the tax we were owed was 2,000. We paid the government 8,000.
Do I make a journal transaction and add the two amounts so it's minus 8,000?
@JamieD could you help?
Hey @ColinIRL. To confirm -- have you received the funds for the tax amounts that you were already owed? Or is there still an outstanding balance for the amount that you've needed to pay? Basically I'm just trying to figure out what's happening in real world as Wave best fits that module (if you still have a balance leftover from the total owed, you should only create the Journal Transaction for the $8000).
@JamieD Yes, we don't receive funds as such. Whatever tax we paid on purchases is just deducted from the tax we made on sales.
Ah okay @ColinIRL, so essentially you're tracking/netting out taxes? I would recommend double-checking with a local tax expert to ensure that everything is setup correctly, but Wave should be automatically doing this for you if you're recording the same income and expenses to the same sales tax liability. You can verify this in the Sales Tax report, which should show you owe (or is owed to you) after reconciling paid against what you received as part of the income.
Of course, this will also depend on whether you are tracking a sales tax as recoverable or not, which you can check on via Settings > Sales Tax. Also, this report should also show any remittances you've made, to offset the currently owed balance. I hope this helps! Let @JamieD or I know though if this doesn't help to clarify!
I'm not understanding why I need to input a payment or refund as a journal transaction. Can't I just add an expense or income transaction with the proper tax selected in Category and the relevant Account? Or make sure the automatic transaction references the proper tax?
Hey @hotch, you can as well - the workflows above are for specific types of movement, but if you're just recording a return or remittance, in our current platform you can categorize the expense or income transaction as Payment to/Return from Tax, and then the appropriate Sales tax.
I am in the process of migrating to Wave from Simply Accounting–going back to the start of 2019. One of my first transactions in 2019 is my HST remittance to the Receiver General. In SA, I recorded a general journal entry like this:
ACCT. DEBIT. CREDIT.
2370. 2,000.00. HST charged on sales
2375. 1,000.00. HST paid on purchases
1060 1,000.00. checking account
I paid the Receiver General $1,000 on filing.
I see from above how to record the similar journal entry in Wave. My question is how do I "pre-populate" the $2,000 and $1,000 HST into the system so the balances work out after I pay my bill?
Hey @Juggler! I think the best option would be to record these amounts in Wave as income (for charged on Sales) and expense (paid on purchases) and set the category to Owner Investment/Drawings, which will designate a starting balance. Once done, you'll need to then create two separate Journal Entries in which you can credit the appropriate tax liabilities so that those values count as a starting balance for those taxes.
Hi! I have found that Wave does not round when computing sales tax owed and my taxing authority does. They also have a small discount for filing on time. This creates a discrepancy in what is originally owed in my books and what I actually pay. How do I account for this in Wave? Thanks!
Hey @NHawk! In this case, you basically would just want to create a journal transaction into an income or expense account for the difference. For example, let's say Wave calculates the sales tax owed as $132.49 and your jurisdiction rounds up to $133.00. You would need to debit the Sales Tax Expense account $0.51 and then credit Sales Tax Liability $0.51. For a credit, you would want to debit Sales Tax Liability and then credit Sales Tax Credit Income.
Is there a way in this account to identify sales tax owed on purchases I have made through the internet ? NY requires all purchases have tax applied, yet if I make a purchase for $100 worth of widgets and the vendor does not apply NYS tax, then I pay $100. When I come to file my sales tax return, I have to pay $8.13 on that $100 purchase (as if I'd bought locally). I cannot find a way to segment the transactions so I can easily figure out what has been taxed and what has not (and therefore what tax I need to pay) ?
Hey @ewb! This is a good question, and a little difficult to execute in Wave, but still possible. So, the first step would be heading over to Settings > Sales Tax, and generating a specific tax for this out of state NYS tax - separate from your current NYS taxes. You will also need to set this tax as 'recoverable' so that it shows on the correct report (even though technically it is not yet paid and may not be recoverable in reality).
Now, once you record one of these expense transactions, you'll want to add this tax to the transaction, which should populate and assign a value over to the tax liability account. You can then use this figure to show what is owed back to the government via the Reports > Sales Taxes report. I hope this helps to clarify!
@Nezzy Thanks for sharing your workflow! Just remember that, although this may be correct accounting way to accomplish this, but it does render the Sales Tax Report useless.. as long as it's working for you the way you like, that's all that matters.
Hi! I'm trying to extract the information from all my Expense Transaction that has the Sales Tax. How do i do this?
Hey @owl. Just to confirm with you here -- are you trying to export your expense transaction data from Wave that has the Sales Tax information? If so, there isn't a way to specifically do this .. you can, however, export the Sales Tax report that would include the total amount associated with purchases subject to Sales Tax. It could be a feature that we implement in the future (in terms of being able to explicitly export expenses associated with Sales Tax, but we don't have any immediate plans just yet.