Record a Tax Payment
Four steps, in order.
The last one is the one people forget, and it is the one that tells you whether the other three worked.
Partial and late payments
| Case | How to record it |
|---|---|
| Paid in instalments | One tax payment per instalment against the same period |
| Paid late with interest | The tax as a tax payment, the interest as an expense |
| Penalty charged | An expense. It is not tax and is usually not deductible |
| Refund offset against next period | Record the offset rather than a cash refund |
| Refund received short | Record what arrived, then find out why before assuming an error |
Direct debits and offsets
A tax authority taking payment by direct debit is still a payment you record, on the date it left. An authority offsetting a refund against your next liability is not cash at all, and recording it as a receipt would put money in your bank that is not there.
- Direct debit: record on the date it cleared, from the account it left.
- Offset: record the offset against both periods rather than as a cash movement.
- Payment on account: possible and best avoided. Match it to a period as soon as one is filed.