How to adjust the sales tax amount in the "Pay Sales Tax" window in Microsoft Office Small Business Accounting (917776)

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You may want to adjust the sales tax amount when the following conditions are true:

• A tax agency has a monthly payment term.
• You pay sales tax on an accrual basis when the customer is invoiced.

If you post an invoice in the current month, you cannot see the sales tax amount from that invoice in the Pay Tax Agencies dialog box until the next month.

Method 1: If you pay sales tax when the invoice is saved (accrual basis)

To pay sales tax on an accrual basis, follow these steps:

1. On the Company menu, click Preferences.
2. On the Company tab, click Accrual basis in the Taxes section.

To adjust the sales tax amount, follow these steps:

1. On the Company menu, click New Account, select the account type, and then create a new account. Typically, the account that you select is an expense account or an income account.
2. On the Company menu, point to Sales Tax, and then click Adjust Sales Tax Due.
3. In the Date effective field, enter a date that is older than the current month, quarter, or other tax period. The date that you enter depends on the payment terms of the tax vendor that you want to pay.
4. In the Tax income or expense field, click the account that you created in step 1.
5. In the Adjustment field, click Decrease or Increase.
6. In the Tax Code to adjust field, click the tax code that you want to adjust.
7. Click OK.

Method 2: If you pay sales tax when the invoice is paid (cash basis)

To pay sales tax on a cash basis, follow these steps:

1. On the Company menu, click Preferences.
2. On the Company tab, click Cash basis in the Taxes section.

To adjust the sales tax amount, follow these steps:

1. On the Company menu, click New Account, select the account type, and then create a new account. Typically, the account that you select is an expense account or an income account.
2. In the new account window, click to select the Include in cash-basis reports check box.
3. On the Company menu, point to Sales Tax, and then click Adjust Sales Tax Due.
4. In the Date effective field, enter a date that is older than the current month, quarter, or other tax period. The date that you enter depends on the payment terms of the tax vendor that you want to pay.
5. In the Tax income or expense field, click the account that you created in step 1.
6. In the Adjustment field, click Decrease or Increase.
7. In the Tax Code to adjust field, click the tax code that you want to adjust.
8. Click OK.

Note The Tax Collected column on the Sales Tax Liability report displays the total sales tax that was collected from customers for the date range that you specify. The value in the Amount to pay box in the Pay Tax Agencies dialog box is calculated by using the system date and the payment terms that are assigned to the tax agency.