QuickBooks can take you to the next level in making, recording and tracking all your business financials. Recording entries is so much easy that with just click of a button you will have everything managed. And more over it provides you with the cloud benefits as well, thus you take your business accounting where ever you go. It not only helps you recording your inventory or tracking your invoices but allows you to manage your taxes as well.
Why it is helpful?
Being the small business owner, it is very crucial to make estimated tax payments, not only it makes your life easier but helps your business feel a lot less pressure. Though there are many ways to record and track your estimated tax payments but here we will go through the process of recording them in QuickBooks.
- 1 How to Track and Record Estimated Tax Payments in QuickBooks:
- 2 FAQ’s
- 2.1 What do you understand with Estimated Tax Payments in QuickBooks?
- 2.2 How do I Record Estimated Tax Payments in QuickBooks Self-Employed (QBSE)?
- 2.3 When do I have to Make Estimated Tax Payments?
- 2.4 Is Estimated Tax Payment an Expense and how do i Categorize an Estimated Tax Payment on QuickBooks?
How to Track and Record Estimated Tax Payments in QuickBooks:
Follow the steps:
- To record your tax payments, create a new Equity account.
- Click on the chart of accounts tab. You can access the tab by clicking on the CTRL+A button.
- Once you are inside the tab you would need to create a new account. If you cannot locate that already then access it with a keyword shortcut Ctrl+N.
- Assign the account to Equity account from the Types list.
Create Other Expenses account..
If you are not of the view of creating a new equity account then you can simply record your entries in the Other Expenses account. To do that create the account and track your taxes. This kind of account is especially helpful for those running a sole proprietorship firm. In order to create an account within your QuickBooks company file:
- Click on the settings tab, also known as the Gear Icon. This you can find on the top of the navigation bar within the software.
- From the drop down button that will appear, click on the chart of accounts tab.
- From the window that will appear, hit the new tab and your new account will be created.
- In order to assign what type of account it is, click on the other expenses and now your account will be assigned as Other Expense account.
Advantages of creating an Equity account over Other Expenses account
There are several advantages of creating an Equity account over Other Expenses account. These are as follows:
- By maintaining a separate equity account you will be separating your tax payments as well. This way your tax balances will not be appearing on your Company’s P&L account. Thus this helps you show the real profits of your company.
- As you are now managing a separate equity account thus they will now be reflected within your balance sheet. They will be shown as withdrawals and will now give you a clear picture of your money at hand. This way you will help yourself in maintaining easy reports.
Need more help…? Then get in touch with us at our toll free number. Our QuickBooks Proadvisor from Canada will then get in touch with you and help you Track and Record Estimated Tax Payments in QuickBooks and resolve your issue.
What do you understand with Estimated Tax Payments in QuickBooks?
If you’re self-employed, you’ll usually have to pay your taxes four times a year in “estimated” payments rather than one lump sum payment. Since you’re calculating how much money you’ll make this year and paying taxes on that amount, it’s called “estimated” (income tax, self-employment tax, and any other applicable taxes).
How do I Record Estimated Tax Payments in QuickBooks Self-Employed (QBSE)?
QuickBooks Self-Employed (QBSE) software helps you in tracking the business-related transactions and also you can make quarterly estimated tax payments from this application.
Once payments are made then you can file your Schedule C along with an annual tax return (1040). To record your estimated tax payments, it is suggested you first sign up to your QBSE account. There are three ways to record here’s how:
🔹 First option:
● From the left menu bar, go to the Taxes section
● Set the accurate year and select the Quarterly tab
● Choose the quarter that you wish to mark the tax payment for
● Next, click on the option “Find the Estimated Tax Payments” beside the option “Don’t see your payment?
● After that, check off the tax payment and hit “Mark as tax payment” in the end.
🔹 Second option:
● Go to the Transactions tab in order to verify the business spending transaction
● Then manually assign its category from the Taxes & Licenses to Estimated Taxes.
🔹 Third option:
If you printed a tax payment coupon then QuickBooks will automatically match the spending transaction when it appears on the system. But make a note that it doesn’t count estimated tax as “paid” when you print it.
When do I have to Make Estimated Tax Payments?
If you want to register your business as a sole proprietor, partnership, S corporation member, or self-employed entity, you’ll almost certainly need to make quarterly estimated tax payments if you owe $1,000 or more in taxes.
If a company expects to owe $500 or more in taxes for the year, it is usually required to make estimated tax payments. If you meet the IRS’s minimum requirements, you’ll almost certainly have to file quarterly estimated taxes.
Is Estimated Tax Payment an Expense and how do i Categorize an Estimated Tax Payment on QuickBooks?
These tax payments are personal; they are not a business expense. For that, you are required to consider using the Owner’s Draw or the Equity Account. If you have not set up an account yet then here’s how you can set up an account:
● First, go to the Accounting section and then select “Chart of Accounts”
● Next, click on the New button and select Equity as your “Account Type”
● Once done then select “Estimated Taxes” within the Detail Type using the drop-drop arrow
● After that, enter the details of account
● In the end, click on the Save & Close button.