Setting up partially recoverable taxes

If you are a GST/HST/QST registered business, you can claim some of the taxes paid on expenses on your tax returns. For GST/HST, these entries are called Input Tax Credits (ITCs) and the QST they are called Input Tax Refunds (ITRs). For additional information about ITCs and ITRs, see the Government of Canada website.

Some expenses like meals and entertainment have partially recoverable Input Tax Credits (ITCs) or Input Tax Refunds (ITRs). Follow the steps below to set up Accounting to allow you to account for these types of expenses.

To set the default ITC/ITR percentage:

  1. Go to Settings, and then Sales Taxes.
  2. Enter a percentage in the Default Part Recoverable ITC/ITR field. This percentage will be used by default for all ledger accounts you set for part recoverable taxes.
  3. Click Save to save your changes and to return to the Settings page.

To configure ledger accounts for part recoverable taxes:

  1. Click Chart of Accounts.
  2. Locate and then click ledger account you want to set up or click New Ledger Account.
  3. Partially recoverable taxes are only applicable to Direct Expense or Expense ledger accounts. Be sure to select existing accounts of these types or be sure to select one of these categories if you’re creating a new account.
  4. Click Transactions posted to this ledger account have part recoverable taxes.
  5. By default, the percentage you entered in step three of the previous procedure displays in the percentage field. If necessary, edit the percentage.
  6. Select the ledger account where you want to post non-recoverable taxes in the Non-recoverable tax ledger account field.

For new businesses, ledger account 9200 – GST/HST/QST Unreclaimable Tax Expenses is added to the chart of accounts. This allows you to select it for non-recoverable taxes. If you have an existing business, you may need to create a new ledger account for non-recoverable taxes.

  1. Click OK to save your changes.
  2. Click Save.
  3. Repeat steps 2-7 as needed for other ledger accounts.

When you select a part recoverable ledger account while creating a transaction, Accounting will indicate that the line item includes part recoverable taxes. This doesn’t change the transaction totals but changes how much tax can be reclaimed on your tax return. The total amount of recoverable taxes shows in the transaction totals.