Im not sure how to do this, or even if im doing this right, but I received non taxable income from PPP and EIDL grant, and i have it in its own income group called “Non-Taxable income” is there a way to exclude this group or the accounts in it from showing on net profit/loss?
First, financial accounting and tax accounting often differ.
Second, you can define your chart by accounts to separate non-taxable income and show interim totals. Read the Guides.
Third, treatment of those COVID programs can take many forms. You should consult a qualified CPA for guidance. Whatever advice you receive can be implemented in Manager. But this forum is not the place for tax advice.
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I don’t know which country you are in but here in Australia I was advised by an ATO auditor to create an Equity Account and post the receipts there so they appear on the BS but not under the P&L.
@Tallen, I should add a fourth point. Treatment of funds from COVID relief programs can depend on your legal form of organization, too. Again, consult an accountant. You will be subject in your jurisdiction to audit on COVID grants and forgiveness for six years, longer than normal limitations. The accountant’s fee will be well worth the trouble it keeps you out of.
Although I agree with most what was recommended here, especially related to these COVID relief programs, it would be more elegant if Manager would allow for excluding corporate tax on grants from the final calculated net profit/loss where this is legal. They should still be recorded as revenue but non-taxable and therefore also in Manager should not be included in the final calculated net profit/loss. Yes, financial accounting and tax accounting often differ but an adjustment of Manager in this regard would still be better also from a financial accounting perspective as now it shows an incorrect net profit/loss.
Also note that there are many other kind of non-taxable grants that business and especially non-profit organizations can benefit from.
Getting Manager to compute income tax is a rabbit whole Manager should not attempt to enter.
Calculating of income tax is a very complex process a whole lot is involved in reconciling accounting profit to taxable profit. But the tools to save time doing that should be available.
Once upon a time I suggested that the Report Transformations and Reporting Categories tools be enhanced to include accounts to enable users to create any structure of statement they want. Such a tool wouldn’t be able to determine taxable profit but it will do a lot of adjustments (additions and subtractions) to reduce the time accountant would need to determine taxable profit for any given period.
For now, I think the answer lies in @Tut comment.
But one cannot have an all purpose Chat Of Accounts. Your chat of account cannot serve two or more masters properly. It can be optimized to help determine tax positions or accounting profit, or help in Managerial accounting or financial management/analysis. It can never be structured to serve all these purposes properly at the same time.
Yes
Create a subtotal near the bottom of your COA on the profit and loss side called “Taxable income” then put non taxable income (and expenses) below that on the COA.
For one off special purpose payment it also more clearly illustrates actual business performance imo.
Where that COA layout is problematic, a more general solution is described in the following ideas threads Income tax payable and New Custom Fields and Chart of Account
Hi @Wornout @Patch , can you show me your account structure please,
I followed this method but it didn’t work.
In Settings → Chart of Accounts then on the Profit and Loss side
- Select New Total and name it as “Taxable income”
- Also create another New Total and name it as “Non Taxable income”
- Click on the sorting arrow (right of each account) to move them down as pictured below:
Make sure all Taxable Accounts are on top of the new “Taxable income” subtotal and the non-taxable below that and above the “Non Taxable income”
Note that Manager will below that automatically still put a Net Profit/Loss grand total that is matched on the Balance sheet side and can not be altered or removed. Do not put anything below the Manager Calculated grand total!!
You have to allocate the non taxed income to the “non taxable income” account you created.
Your summary page screen shot shows you have allocated no income to that account so obviously the zero balance account is having no effect on your reported account totals
Edit
Quoted from OP in error as screen shot from another user.
I did not post any screenshots on this thread.
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