Expense for to prior years.

[Guest]

Our club didn't collect or pay sales tax on a taxable service for
several years. When we discovered the error, we paid the tax from cash
on hand and then assessed a surcharge on dues and services to recover
the expense, actually collecting more than the back taxes before
discontinuing the surcharge.

What's the proper way to account for this? It doesn't seem that the tax
payment should be treated as expense for the year in which it was paid,
or the assessments as income in the year collected (with the exception
of the extra amount collected). Any advice on these questions would be
appreciated.

[Golden California Girls]

wbickner@usfamily.net wrote:
Our club didn't collect or pay sales tax on a taxable service for several years. When we discovered the error, we paid the tax from cash on hand and then assessed a surcharge on dues and services to recover the expense, actually collecting more than the back taxes before discontinuing the surcharge. What's the proper way to account for this? It doesn't seem that the tax payment should be treated as expense for the year in which it was paid, or the assessments as income in the year collected (with the exception of the extra amount collected). Any advice on these questions would be appreciated.

Insufficient information.

Are you (your club) a cash basis taxpayer? Unless you really want to go
to a lot of trouble I would suggest keeping your books Uncle Sam's way.
To keep those GAAP books you need accounts to account for the difference
between Uncle Sam's way and the GAAP way.

[Allan Martin]

<wbickner@usfamily.net> wrote in message
news:1130465596.637394.246720@g43g2000cwa.googlegroups.com... Our club didn't collect or pay sales tax on a taxable service for several years. When we discovered the error, we paid the tax from cash on hand and then assessed a surcharge on dues and services to recover the expense, actually collecting more than the back taxes before discontinuing the surcharge. What's the proper way to account for this? It doesn't seem that the tax payment should be treated as expense for the year in which it was paid, or the assessments as income in the year collected (with the exception of the extra amount collected). Any advice on these questions would be appreciated.

Report both the expense and the surcharge on the current year's books.
Disclose these non-recurring items on your financials.

[Guest]

I'm a rank amateur, and don't know how "Uncle Sam's way" is different
from US GAAP. We are a tax-exempt 501(c) organization. The books I
inherited and our 990-EZ federal returns are cash basis. I ask these
questions because a club member said the previous treasurer should not
have handled the back tax payment and member surcharge as expense and
income. He also said that payments for past periods should credit cash
and debit our equity account, and the surcharge should be handled as an
asset account. I'd appreciate your comments on this.

[Allan Martin]

<wbickner@usfamily.net> wrote in message
news:1130514167.883532.34360@z14g2000cwz.googlegroups.com... I'm a rank amateur, and don't know how "Uncle Sam's way" is different from US GAAP. We are a tax-exempt 501(c) organization. The books I inherited and our 990-EZ federal returns are cash basis. I ask these questions because a club member said the previous treasurer should not have handled the back tax payment and member surcharge as expense and income. He also said that payments for past periods should credit cash and debit our equity account, and the surcharge should be handled as an asset account. I'd appreciate your comments on this.

A club member does not mean anything. What is the member's background,
credentials and education in these matters.

If the member actually said that the surchage should be handled as an asset
then I would be quite suspect as to this person knowing what they are
talking about.

[Lisa C]

<wbickner@usfamily.net> wrote in message
news:1130514167.883532.34360@z14g2000cwz.googlegroups.com... I'm a rank amateur, and don't know how "Uncle Sam's way" is different from US GAAP. We are a tax-exempt 501(c) organization. The books I inherited and our 990-EZ federal returns are cash basis. I ask these questions because a club member said the previous treasurer should not have handled the back tax payment and member surcharge as expense and income. He also said that payments for past periods should credit cash and debit our equity account, and the surcharge should be handled as an asset account. I'd appreciate your comments on this.

Is the club member an accountant?

Your question is not a QB question but an accounting question. Some of the
accountants in the newsgroup may have comments, but really it is the
accountant who prepares your tax returns that you should ask.

You might also post to an accounting newsgroup.