How Can I Correct My Sales Tax Payable Amount?

You can record sales tax payable adjustments in accounting software such as QuickBooks.

Correcting or adjusting sales tax payable amounts is not a difficult process, but you must record entries correctly to ensure the accuracy of your quarterly sales tax payments. The methods used to correct sales tax payable account inaccuracies can vary depending on what caused the inaccuracy. Adjust sales tax payable in most accounting software by making a general journal entry. In QuickBooks, you use the "Adjust sales tax amount" menu item, which is provided specifically for corrections and adjustments to sales tax payable amounts.

Instructions

QuickBooks

1. Click "Vendors" on the top menu, then "Sales Tax," and lastly "Adjust Sales Tax Due" to open the "Sales Tax Adjustment" dialog box.

2. Enter an adjustment date in the "Sales Tax Adjustment" dialog box.

3. Enter an entry number if this is your first time making an adjustment in QuickBooks. Start with a number in your preferred format. QuickBooks will increase the number automatically. For example, if you start with AE01, the next adjustment will be AE02.

4. Click the arrow next to "Class" in the "Sales Tax Adjustment" dialog box to enter a class. This field is optional for individuals who use the class field in transactions.

5. Click the arrow next to "Sales Tax Vendor" in the "Sales Tax Adjustment" dialog box to enter the state tax agency where you are making the adjustment.

6. Click the arrow next to "Adjustment Account" in the "Sales Tax Adjustment" dialog box to choose an adjustment account. Choose an income account such as "Other Income" to record a credit adjustment. Choose an expense account such as "Interest Expense" or "Interest Due" to record a fine, penalty or interest. Adjust for a rounding error by using an income account such as "Misc Income" or an expense account such as "Misc Expense."

7. Click the proper radio button in the "Adjustment" section of the "Sales Tax Adjustment" dialog box to "Increase Sales Tax" or "Reduce Sales Tax." Enter the amount of the increase or decrease in the "Amount" box.

8. Enter a new memo or edit the default memo ("Sales Tax Adjustment") if you prefer and click the "OK" button to close the "Sales Tax Adjustment" dialog box. Record the adjustment.

9. Select "Vendors," then "Sales Tax," and lastly "Pay Sales Tax" to open the "Pay Sales Tax" dialog box.

10. Select the adjustments and any sales tax payments due listed in the "Pay Sales Tax" dialog box, and click the "OK" button to record the payment. The adjustment will appear on your check stub as a separate item from the payment.

Accounting Software

1. Open a "General Journal" window. Check the "Adjusting Entry" box. Increase the sales tax payable with a credit (C). Decrease the sales tax payable with a debit (D).

2. Record a reason for the adjustment in the "Memo" box.

3. Credit "Sales Tax Payable" and debit "Cash" to correct a miscalculation of sales taxes if you need to pay more -- or less -- sales taxes.

4. Credit "Sales Tax Payable" and debit the correct expense account if you are recording a fee or penalty. Examples of correct accounts include "Interest Expense" and "Penalty Expense."

Tips & Warnings

• If you are unsure of how to perform the action, ask an accounting professional.

References

• Intuit: Adjusting the Sales Tax You Owe Sales Tax Liability
• St. Leo University: Current Liabilities and Payroll

Resources

• CPA911: Understanding Sales Tax in QuickBooks
• Intuit: Adjusting Entry