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HOW TO SET UP THE GST/HST PUBLIC SERVICE BODIES’ (PSB) REBATE IN QBO

UPDATED APRIL 2019

“If your charity is a GST/HST registrant, you have to use a special net tax calculation for charities. When you use this calculation, you generally remit 60% of the GST/HST you charge and claim ITCs only on certain items, where all the conditions for claiming ITCs are met. In addition, you can claim the PSB rebate of the GST/HST paid or payable on your eligible purchases and expenses and for which you cannot claim ITCs, whether the GST/HST relates to your commercial activities or exempt activities.”

Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4082-gst-hst-information-charities/gst-hst-information-charities.html#P283_24869

What does this mean? When you charge and collect tax on sales, you will remit 60% and keep 40% of the amount collected. And although you will only be able to claim ITCs on certain items (know the rules), you will be eligible for the PSB rebate, meaning you will receive a rebate for 50% of the GST or federal part of the HST paid on purchases.

See my other blog post HOW TO SET UP TAX RATES FOR A CHARITY IN QBO TO SPLIT THE GST/HST ON SALES 60/40% here.

Here’s how to set this up in QBO. We’re going to add two new tax rates, then a new tax group.

NEW! You can now post the non-deductible portion back to the original expense account. This is the method I am outlining below. The non-deductible portion previously posted to a GST/HST Expense account that was automatically created by QBO (old method).

NOTE! For non-profit set ups already in place using the old method, you cannot change the existing set up. You will have to start from scratch with the steps below. If starting mid-year, you can go back and re-code individual transactions with the new sales tax code. Consider when you want to implement.

We’re going to add two new tax rates, then a new tax group. We’re not going to touch any of the existing rates. We may need them for other qualifying purchases (know the rules). I’m in a GST-only province, so I’m going to set this up with the 5% GST in mind. You can modify this to work in different provinces by following the same guidelines.

STEP ONE: ADD NEW TAX RATE

  • Open the Sales Tax centre from the left navigation bar
  • Choose ‘Manage sales tax’ in the upper right-hand corner

SS1

  • Select ‘Add rate’

Add rate

  • Fill out as shown

Add rate detail

  • Click ‘Add’

STEP TWO: ADD NEW TAX RATE

  • Select ‘Add rate’

Add rate 2

 

  • Fill out as shown. Note the Non-tracking – this is how you’re mapping back to the original expense account.

Add rate detail 2

  • Click ‘Add’

STEP THREE: ADD GROUP RATE

  • You should be back in Manage sales tax
  • Select ‘Add tax’ in the upper right-hand corner

Add tax

  • Click ‘Add’ next to Group rate

Group Rate

  • Fill out as shown. You’re creating a group called NFP Purchases (or similar) that includes the two tax rates you created in steps one and two. NOTE: BE CAREFUL ADDING THE GROUP RATE. IT CANNOT BE EDITED.

Add tax detail with text

  • Click ‘Add’

REVIEW YOUR WORK

  • You should see the two tax rates along with the group that you just added.

New rates and group

  • SMART TIP: Inactivate the two tax rates you just added by selecting ‘Make inactive’ so that only the group rate appears as a choice on transactions.

TEST THE CODE

Here’s an example credit card expense. When using the ‘NFP Purchases’ tax code, $5.50 posts to the GST/HST Payable account and the other $5.50 posts back to the expense account.

Staples

Staples Journal

NOTES:

I always test these out first in the test drive file. Here’s the link: https://qbo.intuit.com/redir/testdrive_ca

Apply same principals for setting up rates in different provinces.

Use names and descriptions for the tax rates and group rate that make sense to you. Just remember that the group rate cannot be edited.

Here’s a link to setting up rates in Ontario, for desktop: http://intuitglobal.intuit.com/iq/quickbooks/docs/HST_Charity_xONx.pdf

Rules around charities can be complicated. Please check the CRA website for more information.

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HOW TO SET UP TAX RATES FOR MEALS & ENTERTAINMENT IN QBO

UPDATED APRIL 2019

The following guide will help you set up a Meals & Entertainment tax code so that the ineligible amount automatically posts to its own expense account. This frees you from doing those periodic calculations and journal entries. I’m in a GST-only province, so I’m going to set this up with the 5% GST in mind. You can easily modify this to work in different provinces by following the same guidelines.

Here’s how to set this up. We’re going to add two new tax rates, then one new tax group.

STEP ONE: ADD TAX RATE

  • Open the Sales Tax centre from the left navigation bar
  • Choose ‘Manage sales tax’ in the upper right-hand corner

SS1

  • Select ‘Add rate’

Add rate.png

  • Fill out as shown.

Add rate detail

  • Click ‘Add’

STEP TWO: ADD TAX RATE

  • Select ‘Add rate’

Add rate 2.png

  • Fill out as shown. Note you want to choose Expense – this is how you’re mapping the ineligible portion.

Add rate detail 2.png

  • Click ‘Add’

NOTE: Here’s a look at the audit log to see what happened behind the scenes. QBO automatically added a new account called GST/HST Expense. You can change the name if desired (i.e. Non-Deductible GST Expense), as well as the category account type (i.e. Other Expenses), from the Chart of Accounts. You can also assign an account number if you’ve turned them on in settings.

Audit Log

STEP THREE: ADD GROUP RATE

  • You should be back in Manage sales tax
  • Select ‘Add tax’ in the upper right-hand corner

Add tax.png

  • Click ‘Add’ next to Group rateGroup Rate.png
  • Fill out as shown. You’re creating a group that includes the two tax rates you created in steps one and two. NOTE: BE CAREFUL ADDING THE GROUP RATE, IT CANNOT BE EDITED.

Group Rate Detail.png

  • Click Add

REVIEW YOUR WORK

  • You should see the two tax rates along with the group that you just added.

Review your work clean.png

  • SMART TIP: Inactivate the two tax rates you just added by selecting ‘Make inactive’ so that only the group rate appears as a choice on transactions.

TEST THE CODE

Here’s an example credit card expense. $7.50 posts to the GST/HST Expense account and the other $7.50 post to the GST/HST Payable liability account.

Milestones Entry.png

Milestones Journal.png

NOTES:

I always do a dry run in the test drive file. Here’s the link: https://qbo.intuit.com/redir/testdrive_ca

Apply same principals for setting up in different provinces.

Use names and descriptions for the tax rates and group rate that make sense to you. Just remember that the group rate cannot be edited.

Meals themselves must be adjusted at end of period. I always let the accountant know that the ITCs have already been adjusted so they don’t make an unnecessary entry.

If you are implementing this solution mid-year, you will need to do one of two things:

  1. Adjust the ITCs on meals to back out the 50% up to the point you start using the new method.
  2. Go back to the start of the fiscal year and edit all the meal entries to code them with the new ME tax code.

HOW TO SET UP TAX RATES FOR A CHARITY IN QBO TO SPLIT THE GST/HST ON SALES 60/40%

DEC 2018. THESE INSTRUCTIONS ARE NO LONGER WORKING DUE TO THE CHANGES IN THE SALES TAX CENTRE. I WILL UPDATE THE INSTRUCTIONS AS SOON AS POSSIBLE. 

“If your charity is a GST/HST registrant, you have to use a special net tax calculation for charities. When you use this calculation, you generally remit 60% of the GST/HST you charge and claim ITCs only on certain items, where all the conditions for claiming ITCs are met. In addition, you can claim the PSB rebate of the GST/HST paid or payable on your eligible purchases and expenses and for which you cannot claim ITCs, whether the GST/HST relates to your commercial activities or exempt activities.”

Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4082-gst-hst-information-charities/gst-hst-information-charities.html#P283_24869

What does this mean? When you charge and collect tax on sales, you will remit 60% and keep 40% of the amount collected. And although you will only be claim ITCs on certain items (know the rules), you will be eligible for the PSB rebate, meaning you will receive a rebate for 50% of the GST or federal part of the HST paid on purchases.

See my other blog post HOW TO SET UP THE GST/HST PUBLIC SERVICE BODIES’ (PSB) REBATE IN QBO here.

Here’s how to set this up in QBO. We’re going to add two new tax rates, then a new tax group. I’m in a GST only province, so I’m going to set this up with the 5% GST in mind. You can modify this to work in different provinces by adjusting the percentages.

STEP ONE: ADD NEW TAX RATE

  • Click on Taxes from the left navigation bar
  • Click on Add tax in the upper right-hand corner

Add tax from sales tax centre

  • Choose Tax rate

Add Tax Rate Expanded

  • Fill out as shown

GST 60 Percent Sales

  • Click Save

 

STEP TWO: ADD NEW TAX RATE

  • Click on Taxes from the left navigation bar
  • Click on Add tax in the upper right-hand corner

Add tax from sales tax centre

  • Choose Tax rateAdd Tax Rate Expanded
  • Fill out as shown

GST 40 Percent Keep as Income

  • Click Save

 

STEP THREE: ADD GROUP RATE

  • Click on Taxes from the left navigation bar
  • Click on Add tax in the upper right-hand corner

Add tax from sales tax centre

  • Choose Group rate

Add group rate

  • Fill out as shown

NFP on Sales Group Rate

  • Click Save

REVIEW YOUR WORK

SS1

New rates and group for 60 40 split

TIP: You can inactivate (by toggling Off) the two tax rates you just added so that only the group rate appears for selection on transactions.

 

NOTES:

I always test these out first in the test drive file. Here’s the link: https://qbo.intuit.com/redir/testdrive_ca

Use names and descriptions for the tax rates and group rate that make sense to you. Just remember that the group rate cannot be edited.

Rules around charities can be complicated. Please check the CRA website for more information.

Did you sign up for e-statements? Don’t forget to save or print!

So you’ve gone green and signed up for e-statements. Kudos to you! Here’s how going paperless helps the environment, compliments of http://payitgreen.org/

PayitGreen

There’s nothing better than neglecting my own bookkeeping and sitting down to do it a couple times a year. It fulfills my need for a challenge. LOL! (I don’t recommend this, by the way!) This last time, I went to my credit card provider’s website to download the past twelve months of statements into QuickBooks. Except eight of them were gone! Only the most recent four were available to download into QuickBooks. The missing months were easy enough to access in PDF format (they keep seven years for me), but the downloadable files were indeed gone with no way to get them back. That made for a lot of manual data entry for me.

Another of my credit card providers only saves six months, PDF or otherwise. After that, I have to contact them to retrieve the missing statements. This involves an email, a confirmation email, a password and a time limit to fetch them… which I typically miss. I then have to start the entire process of retrieval over again!

Banks and credit card issuers often make only a certain number of statements available online. In many cases, it’s only a few months. If you need to go back farther than that, you may have a few hoops to jump through. You may even be required to pay a fee.

So here’s a reminder. Save those files to your computer every couple months (and if you still prefer to print, no judgement here!).

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