Tax issue - Liability Accounts

CamJustCam

Hi
I received a message from Wave saying that I needed to fix my accounts as I have tax amounts added to my liability accounts. I created a separate Liability account instead of using Wave's Bill format for each of my suppliers - and I track all invoices, receipts and payments against that account.

Vat is added to all those transactions. So if I can't keep them in my liability accounts - where should I place them?
Thanks for any help you can offer....

JulianP

Hey @CamJustCam ! Thanks for reaching out.

To clarify, Wave will not be disabling or suggesting you remove sales tax from liability and equity accounts such as credit cards if those transactions are either income or expense transactions (which are taxable).

For example, were you to categorize a withdrawal from your bank account as a 'Payroll Liability' (a liability categorized transaction) this would not represent a taxable event in your business. However, a meal purchased via credit card is a taxable event (expense incurred and paid through your business) and will still be allowed in Wave.

Following the instructions to filter for Liability and Equity accounts in Wave via the Filter button may bring up income or expense transactions in a Liability or Equity account, or even on asset accounts. When bulk editing to remove sales tax, you can uncheck any transaction categorized into a liability such as credit card. See screenshot below:

If sales tax is inadvertently removed from income or expense transactions , you can quickly readd those taxes by choosing the relevant Equity or Liability accounts from the account selector in the top left of the transactions page; filtering for income and expenses; and re-adding tax where necessary.

Lastly, depending on how far back these transactions go in your business, this may have thrown off sales tax reporting numbers. As such, when deciding whether to make these changes on historical data, we definitely advise that you reach out to a tax accountant or tax preparer.