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Archive for the tag “Taxes”



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.


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


  • Select ‘Add rate’

Add rate.png

  • Fill out as shown.

Add rate detail

  • Click ‘Add’


  • 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


If you do NOT want the unrecoverable portion of the tax in its own expense account, use the Account ‘Non-tracking‘ as shown here. It will post back to the same expense account used on the transaction.

ME Blog Post Updated SS


  • 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


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

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  • 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.


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.

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I always do a dry run in the test drive file. Here’s the link:

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 in any way OR inactivated at this time.

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. NOTE: If you are an accountant, you CANNOT currently do this using the Reclassify Transactions feature. For some reason the custom sales tax codes does not show up in the reclassify feature.

CRA info for businesses and individuals affected by the Fort McMurray and north-east fires

The CRA has issued a news release for those people affected by the recent fires in Alberta. 

I called the CRA this afternoon to get a bit more information for one of my customers who has lost her home in Fort McMurray. I found out that the CRA has set up a Fort McMurray help line. Call the general phone line at 800-959-8281 (individuals) or 800-959-8281 (businesses) and ask to be transferred. The Fort McMurray help line is located in Calgary and currently open 8-6pm MST.

If you are affected by the fires and unable to file or pay your taxes on time, you can request taxpayer relief. You can submit your request by filing form RC4288.

Here are a few things I found out about the form:

Who should file this form? Individuals or businesses affected by the fires who are unable to file or pay their taxes on time. This includes sales tax and payroll tax. Complete one form per taxpayer/business.

When should I file this form? As soon as you get any notices with penalties and/or interest. If you haven’t filed your tax return yet, wait until you do so. Don’t file the form until/unless there are penalties and/or interest to waive.

How should I file this form? Mail your form to the Winnipeg Tax Centre. The address can be found on the bottom of the form. You can also submit the form online using the CRA My Business Account or My Account for Individuals if you have it set up. Anyone you have added as a representative (your accountant or bookkeeper for example) can also submit this form online. As of right now, requests are not being taking over the phone, but this could change.

What address should I use? Use any address where you’re currently getting mail. This does not have to match what the CRA has on file, it’s simply a mailing address.

What about section 3 – Supporting documentation? The form mentions a police/fire report and insurance statements. I was told that as of right now, the CRA doesn’t have a whole lot of information on what exactly will be required if you’re filing for relief. Call before filing to find out what is required.

This is the information I have as of today. I’m sure that the CRA is busy sorting out the particulars and getting agents up to speed on processes. Again, if you have any questions at all, please call the help line. They are very helpful. My heart goes out to all of those affected by the fire.

How do I enter the Small Business Job Credit refund into QuickBooks or QBO?

This week, I’ve been noticing that the Job Credits for Small Business have been appearing in many of my customers’ CRA online accounts. I haven’t seen any refund cheques or deposits yet, but those should be starting to roll in soon.

You might remember the Hiring Credit for Small Business (HCSB) that was around for several years and ended in 2013. This is similar. One notable different is that the CRA will be sending out the refunds rather than having small businesses apply the credits to an upcoming payment.

What’s the Small Business Job Credit?

The Small Business Job Credit will effectively lower small businesses’ Employment Insurance (EI) premiums from the current legislated rate of $1.88 to $1.60 per $100 of insurable earnings in 2015 and 2016. Any firm that pays employer EI premiums equal to or less than $15,000 in those years will be eligible for the credit. Almost 90% of all EI premium-paying businesses in Canada will receive the credit, reducing their EI payroll taxes by nearly 15%.


How will I get the credit?

No action necessary. The Canada Revenue Agency will automatically calculate the credit, meaning no paperwork for you.

The credit will not be carried forward. You will receive a refund by direct deposit (if you’ve signed up for it) or mailed cheque less any outstanding amounts on your account.

This credit can be entered as income or as a reduction in your EI expense.

How do I enter this into QuickBooks?

Banking > Make Deposits


How do I enter this into QBO?

Plus Sign > Bank Deposit


For more information about the Small Business Job Credit, check out

Holiday bonus? What you must know if you’re issuing bonus cheques using QBO Payroll.


I wrote a bonus paycheque using QBO Payroll and the calculations are wrong.


Intuit payroll engineers are aware of this issue and are working on a resolution.


It’s December, a time for staff parties, office treats, and hopefully… bonuses! Today I sat down to issue one such paycheque in QBO. The president of the company wants to pay her hard-working husband a net discretionary bonus of $6000, so this will need to be grossed up. This employee is maxed out on his CPP contributions for the year and doesn’t contribute to EI. His federal and provincial TD1 amounts are set to the 2015 default amounts. His vacation policy is set to pay 9.6% each pay period. Discretionary bonuses are not vacationable in any of the provinces. If you want to confirm this, please check with your provincial department of labour. And make sure you know the difference between discretionary and non-discretionary bonuses (which are vacationable).

There are two ways to pay bonuses in QBO. The first way is to select ‘bonus’ as a pay type when setting up (or editing) the employee. I suggest using this method if you want to include non-discretionary bonuses on regular paycheques. The second way is to simply select Bonus only from the Run Payroll drop down menu when you want to issue a bonus.

Using the second method, I started a Bonus only payroll. Next, I chose to enter the bonus amount As net pay and clicked Continue. I entered $6,000 as the net bonus and realized that QBO is calculating gross pay in the amount of $14,658.38 which is not correct. If you recall, the employee is maxed out on CPP and EI, so the ‘grossed up’ amount of $8,082.38 is all income tax.

Additionally, QBO is calculating and adding vacation pay on the incorrect gross amount. No vacation pay should be added as discretionary bonuses are not vacationable. Unfortunately, there is no way to edit the paycheque to correct for either of these issues.

NOTE: I tried the same procedure using As gross pay and it appears that this is working correctly in terms of the income tax calculation. However, it is still adding vacation pay, which is incorrect.


1. First, let’s add a new bonus policy:

From the Gear menu, choose Payroll Settings. Choose Vacation / Sick / PTO. From the Vacation and Sick Leave Policies box, choose Create to set up a new zero vacation item policy. Choose Vacation for the Category, use Bonus Zero for the description, select the Paid out each pay period radio button, add 0.0 to the Percent of pay earned. Click OK.


2. Next, let’s add the policy to the employee profile:

Choose Employees from the left hand navigation bar. Click on the name of the employee. Click on the blue pencil icon to the right of the word Pay. On number 4, use the drop down menu to select the Bonus Zero policy we added in step #1. Click Done on the bottom right.

3. Let’s pay the employee:

Run the bonus payroll by selecting Bonus only from the Run payroll drop down menu. Choose As net pay or As gross pay and click Continue. Select the employee(s) getting a bonus, and add the amount of the bonus (or net bonus) to the $ field. You can also add a memo if you want. Review the cheque by clicking on the blue pencil icon on the right. Confirm that the amounts are okay and click OK. You will return to the previous screen. Confirm the bank account and the pay date and select Preview payroll. On the next screen choose Submit payroll. On the next screen enter the cheque number and print pay stubs. Click Finish payroll.

4. Return the employee back to the original vacation policy:

Choose Employees from the left hand navigation bar. Click on the name of the employee. Click on the blue pencil icon to the right of the word Pay. On number 4, use the drop down menu to select the original vacation policy. Click Done on the bottom right.


This is my experience only. Yours may differ due to the many possible options in the company file, the payroll settings, and the employee profile. Use the CRA Payroll Deductions Online Calculator (PDOC) to calculate and compare figures if in doubt. And as always, consider trying it out in the test drive file first.

Holy Colour, Batman! QuickBooks 2013 R6 update released in Canada

The R6 update for QuickBooks 2013 is now available for Canadian versions of QuickBooks. If you’ve selected the option for AUTOMATIC UPDATE*, you should be prompted to install the update when you open the program. If not, you can go to HELP > UPDATE QUICKBOOKS > UPDATE NOW and select GET UPDATES. The other option is to manually download the update. Here’s a link to the support page which provides the link, and also, a link to the release notes:

How to manually install QuickBooks 2013 updates

The R6 update introduces the “Company File Colour Scheme” which replaces the “Company Colour Flag” preference. If you use it, it’s suddenly a blast of colour when what you’re used to seeing is a tiny little flag! Orange was okay when it was just a flag, but wow, is it ever bright when it’s the entire title bar! Some of the colours are equally as shocking. I’ve settled on the blue-medium which is fairly easy on the eyes. Here’s where to find it if you don’t have it set: FILE > PREFERENCES > DESKTOP VIEW. Choose the MY PREFERENCES tab and choose a colour under the COMPANY FILE COLOUR SCHEME.

The R6 update also clears up some of the ‘real estate’ issues I was complaining about in an earlier post, along with several other fixes and improvements, many for the Enterprise version. The release notes don’t say anything about the “Fatal Application Exit,” which I continue to get pretty much every day I’m working in QuickBooks. Here’s what Intuit says about the problem:

Error: QBW32.EXE – Aborting Application: QuickBooks is now terminating when working in 2013

I’m still anxiously waiting for the new feature where I have the ability to collapse specific sub-accounts on financial reports to show up in Accountant Edition and Premier and not just Pro!

*NOTE: to set your copy of QuickBooks for AUTOMATIC UPDATE, go to                      HELP > UPDATE QUICKBOOKS > OPTIONS and select the YES radio button next to AUTOMATIC UPDATE. You can also choose whether to used a SHARED DOWNLOAD if you’re in a multi-user environment.

How do I get the correct date range to show when “Filing Sales Tax?”

When you use the FILE SALES TAX feature of QuickBooks and your from and to dates don’t coincide with your actual filing dates, you haven’t indicated the correct date range. It’s fairly simple to manually change the date range for the period that you’re filing, but you can set this up so that the correct date range automatically shows up each time you open the FILE SALES TAX window. Here’s how to set the default date range in the Canadian version of QuickBooks:

Go to the VENDOR CENTRE and double click the vendor RECEIVER GENERAL. Then click on the TAX AGENCY INFO tab. Choose your Reporting Period (Monthly, Bimonthly, Quarterly, Bi-annual, or Annual). Then choose the Period Ending. Once this is set, it will show up automatically when you go to FILE SALES TAX.

I received a bill for GST only. How do I enter it?

Great question. And it has a very simple solution!

Go to Enter Bills > Select Vendor > Fill out top portion as usual > Choose expense account (I use the one associated with the original transaction) and use G for tax code > Enter $0 for the amount > Enter the amount of the GST into the GST (ITC) window in the bottom right hand corner

Don’t use the GST/HST Payable account. You will get a warning and this will affect your Sales Tax Returns. This is what most people tend to do!

Sometimes you’ll receive a bill that includes both GST and Duties. It’s the same basic idea:

Go to Enter Bills > Select Vendor > Fill out top portion as usual > Choose applicable expense account (ie Broker Charges) and use G for tax code > Enter amount of expense > Enter the amount of the GST in the GST (ITC) window in the bottom right hand corner

Bottom line? You can always override the GST amount in the bottom right-hand corner box.

More about GST in upcoming posts. As always, I welcome your questions!

Why you MUST set a closing date in QuickBooks!

You’re a small business owner, and you’ve just sent your QuickBooks data file off to your accountant to complete your tax return for the year ended June 30, 2012. For the next 12 months, your staff unknowingly make changes prior to that date – they delete a few invoices, add a few receipts, add a couple old bills from vendors who haven’t been paid, delete a lost payroll cheque…you get the idea. Now your accountant has the June 30, 2013 data file and runs a report from June 30, 2012 to make sure the numbers match from the previous tax return. THEY DON’T. Now what?



There’s one REALLY important thing you need to do as soon as you send your file to your accountant: SET THE CLOSING DATE! This prevents users from making changes to QuickBooks, prior to a date you select. Here’s how to do it:


Enter a closing date (the fiscal year end). Create a password that users will be required to enter to override the restriction. There’s now also a box to exclude non-posting transactions from the closing date restriction – a fabulous new feature if you use estimates, purchase orders, and/or sales orders. Check it!

Once you set the closing date, you’ll be able to run a CLOSING DATE EXCEPTION REPORT if you ever need to see what changes have been made:


Don’t rely on your users to know whether or not changes they’re making will affect a prior period. SET A PASSWORD-PROTECTED CLOSING DATE TO PREVENT CHANGES.

If you find yourself in the  hypothetical scenario described at the top of this post…call a ProAdvisor to get your books back to where they were when you sent them to the accountant 🙂

NOTE FOR SALES TAX and/or HST/GST FILERS: I recommend that you set the closing date as soon as you’ve filed a sales tax return. In the case of quarterly filers, this means the closing date is changed quarterly. 

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