Business Reports: Business Income, Can the Tax Be Removed

JoelC

I am working one tweaking the Business Reports.

I ran a Business Cash Flow report and noticed that the Income was being reduced by the amount of tax (i.e., assuming $10,000 in income and a 10% tax rate, the income line was showing $9,000).

I would like the Income to be gross of tax (i.e., $10,000 based on the above example).

In an attempt to make this happen, I deselected the "Tax related category" but still used a business tag.

The result was not as expected as the income was still being tax adjusted.

Would appreciate assistance on how to remove the tax reduction. Would it possibly the case that this is not possible to override?

Thank you.

JoelC

Quick Update: I tried a second workaround namely selecting a different "tax related category". That too had no impact as the income was still being tax adjusted.

Would appreciate any and all further insights and solutions people may have.

mshiggins

"Would appreciate assistance on how to remove the tax reduction."

I can think of two ways to do that.

The first approach is likely the easiest, but relies on being able to exclude transactions that have a Business Tag from some reports (such as your Business > Cash Flow report). 

Assign a Business Tag to the tax transaction(s); then when displaying reports in which you do not want the taxes to appear, Customize the report to exclude the Business Tag. 

The second approach should cover pretty much any situation. This approach makes use of the Quicken report Customization "Matching" capability.

Come up with some text of your own choosing that identifies transactions you may want to exclude from some reports. Make sure the text you choose could never occur naturally for any transaction. For this specific case, you could pick something like "##taxes##", for example (the actual text can/should be otherwise totally meaningless to Quicken). The special characters are not necessary; I just suggest them since they make it less likely that the text would ever be something you'd not want to exclude from reports. 

In the tax transactions that you want to exclude from some/any Quicken reports: On the Categories (or Payees, or Tags) tab, key this into them"Matching" "Memo contains" field: "~##taxes##" (NO quotes; and the first character is a tilde). That tells Quicken to exclude any transactions from the report that have "##taxes##" in their Memo field. For split transactions, Quicken will examine each split line to determine whether it contains the Matching text.

-JP

mshiggins

Upon further reflection, I realize that I neglected to ask you to clear up one of your statements, namely: 
"In an attempt to make this happen, I deselected the 'Tax related category' but still used a business tag."

If you mean you Customized the report to exclude the "Tax related category", then I don't understand how that would not have achieved your goal. A Business Tag can't cause a transaction to be used in a report, if the Category of the transaction is excluded from the report.

Can you clarify?

-JP

JoelC

@mshiggins , as always, thank you for your but do no think we are on teh same page. Kindly allow me to clarify as follows:

i) The Business Cash flow reports and the Business P/L report have the correct transaction (i.e., transactions are being properly excluded and included).

ii) The Business Cash flow reports and the Business P/L report are reducing the income by the amount of tax. For example, rather than showing $100 of income (which is what I want) they are showing $90 of income assuming a 10% tax rate.

iii) To work around this I tried two different solutions, neither of which worked:

a) The first proposed solution was to modify the Business Income: Consulting category by assigning to a different "Tax related item". This did not work, the income was still be shown as $90. Whether a different "Tax related item" would be the subject of trial and error.

b) The second proposed solution was to modify the Business Income: Consulting category by not assigning it a "tax related item" (thereby making it a personal category). This did not work, the income was still be shown as $90.

c) Worth noting n both a) and b) the transaction that is being reduced by the tax amount is a transfer form the A/R Account to the Checking Account which has no Tags (i.e.. A/R accounts do not have a Tag field) unless Quicken is adding one behind teh scenes that is not displayed.

I hope the above provides the needed clarity so you that you can provide additional insight and hopefully a workaround.

JoelC

A brief update for this interested.

I spent 3 hours (not a typo) on teh phone with Quicken support. I worked may way up from Level 1 → Level 2 → Level 3 which is their highest support level (at least, that is what I was told).

I will be hearing back from Level 3 support later in the week with an answer / solution to my problem.

Will update everyone then.

Thank you.

mshiggins

Based on your problem description, I'm not on the wrong page; but it appears I created the following response, then forgot to post it - I should have submitted this prior to my last post.
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Is the "tax" you're referring to the "sales tax" that can be optionally applied on customer invoices?

If so, Quicken is not "reduc[ing]" your "income ... by the amount of the tax": 
Quicken never considered that tax as "income" - because it's not income - so there was nothing to "reduce". 

I can't think of any situation where a merchant collects sales tax on behalf of the government (which the merchant must later remit to the government) where that sales tax is "income" to the merchant.

The Quicken invoice payment transactions are not used directly in computing income - they're used only indirectly, and even then only for "cash basis" users.

For "accrual basis" users, the full non-sales tax amount of an invoice becomes income as soon as the invoice is recorded in Quicken ... no payment transaction is ever involved.

For "cash basis" users, the non-sales tax amount of an invoice becomes income in proportion to the amount of each payment transaction applied to that invoice. The full non-sales tax amount of the invoice does not become income until the full amount of the invoice (including any sales tax) is recorded.

At no time does Quicken consider sales tax as income.

If the above does not address your problem; please supply greater detail about how you record your transactions, why you expect ANY tax to be treated as income, and any other insights you may have. Possibly include one or more screenshots. 

If you have concerns about revealing sensitive information, you can create a New "test" Quicken file, and enter just enough data in that test file to be able to provide example screenshots here without compromising your actual data.

-JP

JoelC

@mshiggins

Is the "tax" you're referring to the "sales tax" that can be optionally applied on customer invoices?

If so, Quicken is not "reduc[ing]" your "income ... by the amount of the tax": 
Quicken never considered that tax as "income" - because it's not income - so there was nothing to "reduce". 

i) I checked and you are spot on!

The rabbit hole I went down was caused by the fact that i) the sales tax rate is coincidentally near identical to the corporate tax rate ii) I recognized a portion of the invoice and iii) the portion of the invoice that I recognized equalled the "work portion" (i.e., net of the "sales tax portion").

This is excellent, the mystery seems solved. Huge thanks!

ii) I will test later in the day — when I have time — as to what happens when I recognize the balance of the invoice.

The Quicken invoice payment transactions are not used directly in computing income - they're used only indirectly, and even then only for "cash basis" users.

For "accrual basis" users, the full non-sales tax amount of an invoice becomes income as soon as the invoice is recorded in Quicken ... no payment transaction is ever involved.

I am in complete agreement.

I was testing cash basis as i) no invoices have been sent out this year and ii) prior year invoices were paid this year and iii) I wanted to test the reporting which meant using cash basis.

At no time does Quicken consider sales tax as income.

I am in complete agreement.

*****

Huge thanks for solving the mystery! I had blinders on!

JoelC

@mshiggins , I tested the theory by accepting the remainder of the invoice and everything appeared properly (i.e., the entire income was rejected). Once again, huge thanks!