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Hi, joined up after reviewing tons of different opinions on how this matter should be handled and am really hoping that by posting our specific scenario I will receive more specific answers.
We are a non-profit educational institution, no Income Tax, who overpaid our State Reemployment Tax in Q09/2015.
Today, 3/17/2016 we received a check back for the over paid amount, which was totally unexpected.
Now, we work with a payroll company who does all the accruing of Qtrly taxes on their end, we just book the FL Reemployment Tax Expense as we post the payroll twice monthly. Hence our payroll Liabilities Acct is constantly 0.00 as it is debited and credited on the same journal entry.
I have read that you can either Debit Cash and Credit the tax expense account, Or Debit Cash and Credit Other Income.
More opinions leaned to the first option, since the Tax refund wasn't income but merely a credit to an overpaid expense.
And to me it makes more sense to credit an overstated expense account. My only concern is that the original tax amount was expensed last year.
So if I post an entry (Debiting Cash, Crediting FL Unemployment Tax Exp) to the date check was received or deposited I won't really be affecting the Tax Expense Account in the correct accounting period, which was 3rd quarter 2015.
If I post the same entry backdated to that time, 9/31/2015, although I will be crediting expense account in the correct time, the cash portion of entry will show up as a "deposit" in the register then and I'm thinking that will throw off the already reconciled numbers in our Operating (cash) account.
Am I totally bonkers in thinking this??? Is it ok to back date the transaction, because the cash portion of entry will, be reconciled this month as it should since it will get deposited this month.
Or should I just keep it simple, post to current date Debit Cash > Credit Other Income, memo what it is and let the auditors deal with it?
Thanks Any help would be wonderful and very much appreciated!!!
I should mention we also received a Federal Unemployment Tax Refund. We paid it in 2014 and we should have not since our federally designated tax exempt status exempts us from federal but not state unemployment tax.
But entries for both refunds would be treated the same based on the recommendations. The only difference is one amount is immaterial and the other probably material.
We are a non-profit educational institution, no Income Tax, who overpaid our State Reemployment Tax in Q09/2015.
Today, 3/17/2016 we received a check back for the over paid amount, which was totally unexpected.
Now, we work with a payroll company who does all the accruing of Qtrly taxes on their end, we just book the FL Reemployment Tax Expense as we post the payroll twice monthly. Hence our payroll Liabilities Acct is constantly 0.00 as it is debited and credited on the same journal entry.
I have read that you can either Debit Cash and Credit the tax expense account, Or Debit Cash and Credit Other Income.
More opinions leaned to the first option, since the Tax refund wasn't income but merely a credit to an overpaid expense.
And to me it makes more sense to credit an overstated expense account. My only concern is that the original tax amount was expensed last year.
So if I post an entry (Debiting Cash, Crediting FL Unemployment Tax Exp) to the date check was received or deposited I won't really be affecting the Tax Expense Account in the correct accounting period, which was 3rd quarter 2015.
If I post the same entry backdated to that time, 9/31/2015, although I will be crediting expense account in the correct time, the cash portion of entry will show up as a "deposit" in the register then and I'm thinking that will throw off the already reconciled numbers in our Operating (cash) account.
Am I totally bonkers in thinking this??? Is it ok to back date the transaction, because the cash portion of entry will, be reconciled this month as it should since it will get deposited this month.
Or should I just keep it simple, post to current date Debit Cash > Credit Other Income, memo what it is and let the auditors deal with it?
Thanks Any help would be wonderful and very much appreciated!!!
I should mention we also received a Federal Unemployment Tax Refund. We paid it in 2014 and we should have not since our federally designated tax exempt status exempts us from federal but not state unemployment tax.
But entries for both refunds would be treated the same based on the recommendations. The only difference is one amount is immaterial and the other probably material.