In this presentation, we will discuss a method for tracking deductions related to personal state taxes. I'm thinking here property taxes within our business account within QuickBooks using what I'm calling an equity method. Here we are in the homepage, we currently have the open windows open. In order to open the open windows, you go to the View, drop down and select the open windows list. We're not going to enter this information for property taxes, we're going to assume this is property taxes. It could be the same for any type of state tax that we believe may be deductible, but which is not a normal business expense.

Our goal here to track them out of the business checking account, and in our QuickBooks account, not as a business expense for QuickBooks for the business but as an equity account so that we can track them and give this information to our tax preparer. Note that if we're talking about property tax say on our home, this might Do something that's deductible on the federal tax return and might need to be tracked. Also, it might be tracked, however, through the mortgage company. So if we pay mortgage and the mortgage company actually handles our property taxes as well, then it might be the case that they're going to actually report that at the end of the year, we may not need to track it. If if the if it's going to be reported on the year end statements along with the mortgage interest. So be aware of that.

If however, that's not the case, and we're paying it outside of the mortgage company, they're not going to report it. This is one method we could use any other state taxes that might be deductible that we haven't even if we haven't a question about it, we might say who maybe I should put it in here, maybe like the state DMV taxes for motor vehicle taxes or any type of other local taxes we might have. We may want to list them out and give a report to our tax preparer and ask them about whether or not these types of items would be something deductible even though they're not business expenses. So what we're We're going to do then is we're going to take our bank statement, we've consciously paid these items that we think are deductible, even though they're not business expenses out of the business checking account.

And here's our bank statement, which would then of course, reflect all payments made out of it. We've been recording all the payments out of this entering them directly into our QuickBooks check register, we are now going to go down and we're going to enter these items and continue just entering this information out. We've written checks, this would be the same if we didn't write checks, we have electronic transfers or anything like that electronic payments. As long as it came out of our checking account, it'll be on the bank statement. And if we can find the vendor that we paid, then we can decide where what account we want it to go to note that if you're following along, we have not entered data for this E trade IRA yet, we're going to pick that one up when we do the bank reconciliation. So we'll do the bank reconciliation.

We will notice as we do the bank reconciliation that we have not yet picked this one up and we will into that went up in a similar fashion, noting that it'll be a similar format that we'll have to record it as a draws account, this being something that we're going to say is not going to be a business business related deduction for the IRA. But something we still want to track for tax purposes. And we will do that at that time when we do the bank reconciliation at the end of this section. So we're going to continue with this, we're going to enter these two first, just to give an example of kind of normal checks. These two are going to be employee payroll checks, and we're just going to enter the net check as if this was being done by someone like ADP or paychecks.

And we're just entering this information into our system to get the net check in the system. So just to give an example of normal kind of what we would think of business expenses, and then we'll go up here to the state tax, which is property tax, which I'm assuming this is on our home, not on the business, and therefore it's something that the tax preparer may want at year end, but not so Something that is going to be a business expense on the schedule, see the business return if we're if we're a sole proprietor. So that's what we'll do here, we're going to enter these two first, just to show what, you know, a normal type expense will show up on an income or Expense Type account. So let's do that. First. Here we go.

Here is our QuickBooks file. We're going to select the banking drop down and go to use register. So we're in use register, we're going to use the checking account and say, okay, and we're going to say that this happened on the 31st. So I'm going to say the 31st. And we're going to enter these two payroll paychecks first. And so that's going to be 1043.

This was to Adam Hamilton. Adam Hamilton, we paid 3539. That's the net check. Again, we're assuming this is a payroll check. So we're going to put this in payroll as payroll expenses. So the point is, it's a normal type of expense.

What we are recording here note, we're not running through payroll through the process of QuickBooks. We're assuming was done by a separate outside ADP or outside payroll provider and we're entering the net check here. And we're not entering the whole gross check. So just note, we're entering just to give an example of a normal basically business expense, we're not going to get into payroll here. So that's going to be that item, we're going to say, Okay, and then we'll do the same thing for Erica, which is our other employee, we're going to go highlight that. And Eric as our other employee, we're going to say that's going to be a 1045 was the check.

We're going to say Erica Robinson 630. We're going to put that into payroll. Now the reason payrolls not populating is because payroll is kind of a special account. So typically, QuickBooks wants us to run through the payroll process in order to record payroll to purchase payroll and run through the payroll process. That's why it's not populating automatically when we put the employee in place as it has been with other vendors. For our purposes here, we just want to note that it is an issue stance kind of like a normal type of expense, something that should be long on the income statement as opposed to the property taxes on our personal property that we will do next time.

So we're going to go back, we're going to mark this off, we've completed that one. Now we're going to go in into the state taxes, this being our item that we're going to practice all of this being an item that we think is going to be deductible, possibly, but not as a business expense, and therefore something we want to track on our business account, because that's where we're good at tracking things, but not put it on as an expense, but in this case, as a draw. So this is going to be the state tax on 325. We'll go back to QuickBooks and we're going to say this is on 325. I'm going back down to the 25th. And the check numbers back down to the 1042.

And this is going to be state taxes profit. Now this is just a generic vendor name, obviously would be the state tax collector that we would be paying here. But I'm going to call it state tax, and we're going to call it property tax, property tax and tab, quick add vendor. 346 is the amount we're going to have. And the point is, we're not going to put it into an expense because it's not a business related tax, I'm assuming this is on our home, a personal expense. So I'm going to set up a draws account and call it state and local taxes.

So I'm going to anything that's a state and local tax that I think might be deductible, I want to track it, pay it out of this account. So I will remind myself to track it in the accounts that I'm good at tracking on the business accounts, but put it to the this draws account not affecting the income statement. Therefore allowing me to provide this to the tax preparer, at the end of the year as a report to ask if we can deduct these items. So we're gonna say set up and we're going to make it not an expense. That's The key it's going to be an equity account. So we'll make it to an equity account and Save and Close.

And we should probably put a memo I'm not however, I would recommend doing so though. And then we're going to say enter, then we're going to go to our report. So let's go to the reports drop down up top, company and to financial, we're going to go down to the balance sheet standard, changing the dates up top, and the customized reports. So we can get the range a 10119 to 1230 119. January through December 2019. I'm going to change the font just for the fun of it, and go to the font here.

11. Okay, yes. Okay. So check in account, we paid out of a checking account. If we double click on that, we go to the end, we see the three checks, we wrote, here's our two payroll checks that we entered normal business expense, here's our other two draws, they all came out of the checking account, that's fine. It's just that we want to make sure that they're going to the proper expense or draws account.

Other than that, so we're going to close this back out. Scrolling down here is our draws account. Notice we got a few of them now. So it gets a little convoluted down here on the equity section. But it shouldn't be too bad if we don't have too many of them for coding here to the state and local taxes. And there is our item if we double click on that, we'll have our state and local taxes which we can then provide to the tax preparer at the end of the year and we can list any taxes that are here, give them this report him or her this report and say, hey, are these deductible here are the items that we think might be deductible as state or local taxes, they're personal, they're not on the income statement.

They're not business related. We're gonna close this back out, and then see the other side of the income statement or see the other report Profit and Loss income statement reports drop down, company and financial, profit and loss. We're going to make this date range. Oh 10119 to 12. 30 119 that's January 1 2019 to December 31 2019, the year that we are working on. We'll note of course, that the payroll will be included in here we have the payroll expense for those two checks, we wrote those been business expenses.

Again, they're they're recorded net on the paycheck. So we're not talking about how to record payroll here. But payroll would be a normal business expense as opposed to the state taxes that we paid on our home, which is not a business expense and therefore not on the profit and loss of the business that we within us if we were a sole proprietor to create the schedule see it so note that it's not affecting then net income