Question

Processing invoice as non-taxable income

Forum|Forum|2 years ago
April 25, 2024
1 reply
0 views

I send out recurring invoices to fellow office tenants as a reminder to pay their portion of the office rent. I accumulate the funds and pay one check to the landlord. I find it simpler to setup recurring invoices so that I don't have to send out emails, but the money received is NOT INCOME. The tenants portion of the rent is pooled with my portion of the rent and sent in one payment to the landlord.

1. How do I post a payment through my bank feed to an open invoice so that I can close the invoice and not have the funds count as taxable income?

2. If it does have to post as income as part of the OQB invoice processing model, then how do I create and adjusting journal entry to offset income by the tenants payment amount?

Thank you....

QuickBooks Online

Service

Incoming money is still income, even though it is just passing through your business and is balanced by an equal expense. The income isn't taxable, and the expense isn't deductible. Don't worry, your accountant will sort it out at tax time.

Create an income account for "rental income pass-through" and send out invoices for that to the other renters.

Set up an expense account called "rental expense pass-through" and another for rent expense for yourself called "rental expense tax deductible." On the expense entry, you will separate the portions onto two lines, one for the pass through amount and another one for your own tax deductible portion.

S

Shania_C

Welcome to the Community, @BeWellManagement.

Let me address your concern about processing invoices as non-taxable income in QuickBooks Online (QBO).

An invoice is considered income since when you send an invoice to a customer, you recognize earned revenue. This aligns with accrual accounting, where income is recognized when earned, not necessarily when received. Moreover, to ensure that the invoice is not taxable, you can check the item/product, or service and check it as nontaxable, also the tenant should be exempted.

After that you can create a bank deposit affecting Accounts receivable where you can apply the invoice, then match the bank feeds in a deposit that you created.

To record bank deposits in QuickBooks Online, you need to first put together the transactions you wish to combine into your Undeposited Funds account. Afterward, use the bank deposit feature to combine them. If you want to learn more, you can watch our how-to videos by visiting the video section. Please note that it's not possible to add customers to deposits in QuickBooks Ledger.

Step 1 is to Put all the transactions you want to deposit into the Undeposited Funds account. This account holds everything before you record a deposit.

Note: If you use QuickBooks Payments, it will automatically process and move transactions into your accounts. However, if you need to combine payments taken outside of QuickBooks, follow these steps.

Step 2 is to Combine transactions in QuickBooks with a bank deposit. Each bank deposit creates a separate record in QuickBooks. Make deposits one at a time for each of your deposit slips.

Select + New and choose Bank Deposit.
From the Account dropdown menu, choose the account you want to deposit the money into.
Select the checkbox for each transaction you want to combine.
Make sure the total of the selected transactions matches your deposit slip. Use your deposit slip as a reference.
Select Save and close or Save and new.

When matching invoices within the banking section, QuickBooks Online looks for open invoices. If it's unable to find one, you can open the payment to expand the transaction and use the Find Match option to search for the transactions.

To create a journal entry in your accounting software, follow these steps:

1. Click on the + New button and select Journal entry from the list.

2. On the first line of the entry, select the account you want to debit or credit from the Account field and enter the corresponding amount in the correct column.

3. On the second line of the entry, select the account that the money is being transferred to or from, and enter the same amount in the opposite column.

4. Make sure that the amounts in the "Credit and Debit columns are equal, as this indicates that the entry is balanced.

5. Enter any additional information or notes about the entry in the memo section.

6. Finally, click on Save and New or "Save and Close to complete the journal entry.

I recommend consulting with your accounting professional for this one. Your accountant can review your books and advise the best way to record the transfer based on your business needs. If you don't have an accountant, don't sweat it. You can find one here in our Resource Center.

Additionally, I will send you some helpful articles to help you learn how to put payments into the Undeposited Funds account before you combine them into a deposit also, how to reconcile accounts in QBO:

I'm only a comment away if you have any questions about processing invoices as non-taxable income in QBO. Take care and enjoy your weekend.

B

BeWellManagementAuthor

I apologize as my accounting English not so good:

1. This is not a product or a servicer for which their item is tax exempt, say perhaps from state tax. The reference to tax is my end of year IRS tax filing and the need to not overstate my income as this is NOT INCOME, but yet a friendly service I provide to my fellow office mates two combine all rent into a single check to the landlord.

2. I am not making direct bank deposits. The individuals Zelle or Venmo the payment to me and then I push the money direct to my business account. I have QBO directly linked to my OBO service and with a daily download of the bank transactions for processing. Each of the Zelle or Venmo transaction need to post to an invoice to close the invoice, but yet not overinflated my income for IRS reporting at the end of the year.

Sign up

Login with SSO

Login to the community

Login with SSO

Scanning file for viruses.

This file cannot be downloaded