what expense account for Estimated Tax payments
what expense for Estimated Tax payments ?
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9 Replies
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06/10/10 12:40pm PDT
The payment is an asset for the company. It would not be an expense until it was no longer estimated. Just something to think about.
06/15/10 10:43pm PDT
The estimated Taxes actually fall under Liability Accounts (Federal, State for example). I found the following information after completing a search on Estimated Tax Payments):
To get a more accurate picture of liabilities, many businesses use QuickBooks to track the amount of money they expect to pay in estimated income taxes.
This topic describes how to track the estimated income tax owed by a business (as a business liability). It does not apply to personal income tax owed by the owners, partners, or other officers of the business.
To do this task
Set up accounts and vendors to track the income tax liability.
Create liability accounts for federal income tax and state income tax (if applicable).
Create expense accounts for federal and state income taxes, if necessary. Your chart of accounts may already include these expense accounts.
Add the IRS and your state tax agency to your Vendor list. If you deposit your estimated taxes in an account instead of writing a check to the tax agency, add the bank as a vendor instead.
Calculate your estimated federal and state taxes.
Increase the balance of each liability account by the amount you calculated.
Pay the estimated income tax.
The payment will decrease the balance of the liability.
The frequency that you update the amount of the liability depends on how you calculate the estimated taxes. At a minimum, you should update the liability prior to the end of the tax quarter.
When it's time to pay the estimated taxes, write a check for the amount owed and specify the liability account that should be reduced.
To do this task
Write a check to the IRS, state tax agency, or the bank at which you deposit the estimated tax payment.
On the Expense tab of the check, specify the amount to be deducted from the liability account.
For the Account, choose the Other Current Liability subaccount for either Federal Income Tax or State Income Tax.
For the Amount, enter the total amount of the check.
Record the check.
Jen
03/09/11 9:56pm PST
Jen, this is great: would you know what happens if I did not record the liability beforehand? I.e. I see that I have negative liability (I paid) but what do I do with recording it once the quarter passed?
On a similar note, if I receive a refund from the IRS for the year before (which is simply returning overpayment). I cannot put it against the liability as this is a refund, it should not change my liabilities this year. Since I did not ask for the amount it does not match any record of liability. Where to receive it?
Frank
03/09/11 9:59pm PST
fs66, unless your business is a C-corp, there is no such thing as an income tax issue for the business. This would be personal and not put into a business bookkeeping system at all.
This topic should have clarified this issue.
FredMorton
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03/09/11 10:33pm PST
I assume you mean the quarterly taxes you pay during the year? If so, if your business is not a corporation, this is a personal tax and is posted to Draw.
03/09/11 11:03pm PST
sorry, I have too many things at once:
I am S-Corp. I pay California with the voucher ($320 for some missed one and the $800 yearly) and I just found the earlier description was detailed enough but copied from two sources: I can make an entry (show liability) by assuming CA a vendor. So it seems okay now, I entered my voucher amounts, thanks!
I am looking for the topic on the other thing: it does not belong here, apologies for bringing it over. The S-corp got a refund for Federal taxes paid... I cannot understand why. If it is Payroll (has to be, am an S-Corp), then Paycycle deducted too much..?... it is automatically done in QB/Paycycle. I simply follow what the QB/Paycycle email tells me on Pay-day, or to-do list. So it is not personal refund, at all, and do not know where to book it. I have to deposit so it would not expire....
Frank
03/10/11 9:38am PST
fs66, we need to separate two types of taxes being discussed:
- Withholding from employees' pay, for their personal income tax responsibility; plus employer's payroll taxes
- Federal and State income taxes owed
An S-corp never owes income taxes. The tax expense and liabilities are passed to the shareholder because the reportable income is passed to the shareholder via the K1. This is item 2, above.
For item 1, above, the corporation has no tax expense for income tax, only for Medicare and Social Security employer matching share. You have to talk to the payroll processor to figure out if the money considered overpaid is the employer's or is an employee's amount.
I suspect the "$800 yearly" is the 940, which is Federal Unemployment Insurance.
If you are going to handle payroll data, you need to be completely clear about these tasks and shouldn't be describing this as "the yearly thing" but the actual name of this tax or payment. Spend some time with the payroll processor or your CPA, to understand this better. You run into penalties and interest for getting it wrong.
03/10/11 5:31pm PST
Well, the IRS sent the money to the S-Corp, not to me in person. Since the Corp paid no taxes it must be for Payroll taxes. This makes it perplexing. I did not even cash the first check (this is the 2nd) as I wanted to call the IRS and missed. Now I even got interest added. They do not owe me.
So, it is from the IRS, to the S-Corp, not personal, and I have no way of booking it. I will keep trying to call them why (this check will expire, too, if I do not find the reason).
But, after the discussions it seems it is an error, anyway, on the IRS behalf. I am only responding to keep myself subscribed to any kind of answer, in case. I suspect I have to ask the IRS why they sent me the check.
PS: The "$800 yearly" is the CA tax on corporations, any kind, S-Corp included. My state is desperate for money :) they are called FTB.
03/11/11 9:52am PST
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fs66, you can contact the IRS and ask for the transcript of your corp payments. This will show the category, too (940, 941).
You should be able to have the payroll processor work with you and figure out this situation. You are paying them for a service, this is part of what you should be getting for your money. Don't be perplexed, make them do their work.
