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The top 10 things you need to know about QuickBooks Online and GST/HST

If you’re just getting starting using QuickBooks Online (QBO), here are a few things to know about GST/HST as of the date of this blog. I’m using the Harmony version.

1.  First things first. You need to set up Sales Tax in order for it to be active in QBO. Select the Sales Tax tab from the menu bar on the left hand side and click on the Set up tax button. Follow the onscreen prompts to complete set up.

Set Up Sales Tax

2. QBO automatically adds two default accounts when setting up GST: GST/HST Payable and GST/HST Suspense. Think of the GST/HST Suspense account as a clearing account. You can even rename it as such. NOTE: You cannot write a cheque that posts directly to the GST/HST Payable account. You can, however, write a cheque that posts directly to the GST/HST Suspense account.

Two Default GST/HST Accounts

3. There are no ‘sales tax items’ in QBO like there are in QuickBooks Desktop. Therefore, journal entries must be entered a bit differently. See #9 below.

4. Completing the Sales Tax Return creates a two-line Journal Entry that simply moves what you owe (or what is owed to you) from GST/HST Payable to GST/HST Suspense. If you create a Payment for that period, you are crediting your bank account and debiting the GST/HST Suspense account. If you create a Refund for that period, you are debiting your bank account and crediting the GST/HST Suspense account.

5. When preparing your return, be careful to set the correct dates and click Refresh to generate an accurate report. Watch for yellow highlighted areas when you prepare a return. If  you have any, stop and review. Double and triple check the dates at the top when about to File Return. This is because…

6. You cannot modify or delete the journal entry that QuickBooks creates when you file a sales tax return. 

Can't Do That

7. Regardless of the date you filed your GST/HST return, QuickBooks uses today’s date for the journal entry that is created when you file a sales tax return. Excel will become indispensable if you’re troubleshooting!

8. When you make a payment (or receive a refund) for a return you just filed, you must be sure to do so by clicking on Record under the Payments column. Do not make a payment using the big blue Record a Payment  button – this is meant for upcoming filings and will create a discrepancy on your next return if used improperly (see #5 – yellow highlighted lines). You’ll know you’re in the wrong payment window if the tax period says Upcoming Filing. Make sure you enter the correct date. I recommend entering a memo as well, for example, “January 2014 Return.” NOTE: when you file a return and create a payment, the payment cannot be printed.

Pay using this button

9. Posting directly to the GST/HST Payable account via journal entry is BAD, even though it’s allowed. Although it will post to the balance sheet account, it won’t show up when you go to file a sales tax return. But don’t panic, Intuit has designed something even better – the ability to assign sales tax to each line of a journal entry. No second independent line for GST/HST needed. When entered this way, it will show up on the return. Accountants commonly post directly to the GST/HST Payable account, so please make sure they know this crucial tip. 

Don't Do This

Do This Instead

10. Made a mistake on your payment and need to change it? You need to delete and re-enter it. But you won’t be able to access the payment from the registers (here you can only view it). You also won’t be able to access it from the View History section of the Sales Tax module. Instead, do this. Use the Advanced Search feature to search for the amount of the payment (see below for suggested filters). Click once on the transaction to open, select delete payment, confirm, then start over using the instructions in #8.

How to Search for a Payment

I hope this article assists you in navigating GST/HST in QuickBooks Online. Please be sure to leave a comment if you have any tips to add. And if you’re really stuck, feel free to contact me to schedule a troubleshooting session.

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9 thoughts on “The top 10 things you need to know about QuickBooks Online and GST/HST

  1. Dovid Lando on said:

    Marnie, thanks for all this info. Can’t say I like all of it, but at least now i know it.

  2. Dovid I’m hoping there’s a bit more flexibility with the sales tax module in the future.

  3. My HST/GST return for Q3 is showing my Q2 payment as a credit, so it’s throwing off my balance owing. Any idea why? Is it because I made my Q2 payment in Q3?

  4. Jenn Kubilis on said:

    Great article Marnie, Im currently working in QBO and this article about GST is very helpful, thanks. Jenn

  5. Why one cannot post directly to GST/HST account is beyond me. The problem is that some receipts contain tips, or PST, or Hotel Tax, or airport tax and all of this throws off the GST 5% calculation. It would be nice just to be able to post the GST amount from the receipt directly to the GST/HST Account….without letting Quickbooks do the calculation. Quickbooks needs to add in some flexibility here!!!

  6. Kelowna Accountant CPA on said:

    Unfortunately you CAN post directly to the GST payable account in QBO and it causes ALL kinds of problems. A journal entry lets you do this. The issue is then the GST report doesn’t pick it up.

  7. Exactly, never post directly to the GST/HST Payable account in a JE. Fortunately, you can use the sales tax column in the JE to manage the tax, which is picked up on the return.

  8. THANK YOU SO MUCH MARNIE!!!! I did the sales tax filing correctly only ONCE since I started my new practice and so had to figure out how to fix 4 quarters of mess. Your article really helped me figure out exactly what I did and I was able to fix it easily (I was dreading taking my entire day to do so). Thank you!!!!

  9. You’re very welcome! I’m glad it helped!

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