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kb111
April 7, 2020
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how to handle a pass thru expense

  • April 7, 2020
  • 1 reply
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We received a check that we deposited into our account from our accountant for a penalty we incurred for late payments.  Since it was her mistake, she paid us the full amount of the penalty.  I now plan to write a check to send out the penalty to the company to whom we owe the penalty.

  

What categories should I use, or how should I enter it so that it basically shows up as  a wash or pass thru type item.  I don't think the payment should count against our expenses but not exactly sure how to make that happen.  I wasn't sure if I needed to do anything special? Or can I just deposit the money into the category/account involved and then pay out the amount using the same category/account?

 

Thanks in advance!

Best answer by john-pero

Use the same account for both and it will be a wash as it should be. Certain penalties (like to government agencies) are not deductible in any event. If you ever might have non-ductible expense of your own you may wish to set up an expense account called "Non-Deductible Expenses", Any actual expenses will show on your P&L but your tax CPA will know to remove them prior to tax filing (in fact if you map accounts to tax forms this account would not be mapped)

1 reply

john-pero
john-peroAnswer
April 7, 2020

Use the same account for both and it will be a wash as it should be. Certain penalties (like to government agencies) are not deductible in any event. If you ever might have non-ductible expense of your own you may wish to set up an expense account called "Non-Deductible Expenses", Any actual expenses will show on your P&L but your tax CPA will know to remove them prior to tax filing (in fact if you map accounts to tax forms this account would not be mapped)

    K
    kb111Author
    April 7, 2020

    Thank you.  It worked perfectly.  

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