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ujjwal
December 19, 2020
Question

How do I configure withholding taxes which we need to deduct while making payment for services availed?

  • December 19, 2020
  • 9 replies
  • 0 views
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9 replies

ReyJohn_D
December 19, 2020

I can help you with your withholding tax concern, @ujjwal.

 

Withholding your taxes in QuickBooks Online is easy. I can share with you the steps to get this done right away.

 

Let's start by creating an expense account to track your withholding taxes. This process can be tricky. Thus, I recommend consulting your accountant for the best accounts to use.

 

Here's how:

 

  1. Go to the Accounting menu, and then choose Chart of Accounts.
  2. Click the New button.
  3. Select Other Expense from the Account Type drop-down menu.
  4. Choose Other Miscellaneous or Other Expense from the Detail Type drop-down list.
  5. Enter "Withholding Tax Expense" in the Name field.
  6. Click Save and close.

Then, you can proceed to create a withholding tax expense item. Let me guide you how:

 

  1. Navigate through the Sales menu, and then choose Product and Services.
  2. Click New, and then select Service from the Product/Service Information window.
  3. Enter "Withholding Tax" in the Name box.
  4. Go to the Purchasing information section.
  5. Choose the withholding tax expense account you've created from the Expense account drop-down.
  6. Click Save and close when you're ready.

Once done, it's time to create an expense or a bill. Then, include the withholding tax amounts to include them when making your payments. I've added a sample screenshot below for your reference:

 

Also, you can enter the tax withheld by your customers in QuickBooks Online. For more insights, please head to this link: How do I record tax withheld by my customer?

 

If you wish to monitor your withheld taxes, you can run an Account Quickreport. To do this, go to the Accounting menu. Then, select the tax withholding account you're created, and then click Run report.

 

When you're ready, you can begin filing and paying your taxes to stay compliant.

 

I'm still up and running for more tax concerns you may have. Feel free to add your reply in the comment section below. I'll be here to help you.

ujjwalAuthor
December 31, 2020

Hi,

 

This does not help. Withholding taxes are supposed to reduce the net payment to be done to vendors. For example, if invoice value shared by vendor is 100 KSH and 5% is supposed to be the withholding tax, we are supposed to pay 95 KSH to the vendor. As per the method your recommended, 5% gets added to 100 KSH and 105 KSH becomes payable to vendor which is wrong.

 

For reference, I am attaching a screen shot which shows how the withholding taxes should work. I have taken this screenshot from QB India.

 

We need the same configuration here.

 

RCV
December 31, 2020

Thanks for coming back, ujjwal.

 

If you are referring to TDS (Tax Deducted at Source), we can enable it for a particular customer. While creating the invoice for that customer, you will get the option to select the TDS section and enter the TDS amount applicable in that invoice. QuickBooks Online (BO) calculates TDS based on the threshold defined under various provisions of the Indian Income Tax Act. 

For enabling TDS for already existing customers, follow the steps below:

  1. Go to Sales or Invoicing from the left menu.
  2. Select Customers at the top.
  3. Click on the name of the customer for whom you want to enable TDS and tap Edit.
  4. In the customer information pop-up, click on the Tax info tab and enter the PAN number and check the TDS Applicable checkbox.
  5. Press Save.

For more details about this one, see How to set up the TDS article. Feel free to visit our Taxes page for more insights about managing your taxes in QBO. 

 

I'll be right here to continue helping if you have any other concerns or questions about QuickBooks. Assistance is just a post away.

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