The rounding method on the invoices is done after taxation.
Can we have an option for the rounding to be done before taxation? Obviously it needs to calculate the amount of rounding before tax, so the total amount after taxation will be round.
What you suggest would not guarantee that either (a) the total after tax will be round, or (b) it will be correct. Tax is calculated on individual line items, then summed, then added to the line item subtotal, then the total is rounded to the lower or nearest unit of the currency (depending on your selection).
(a) Suppose you round to the nearest unit before taxation. A line item amount of 100.49 becomes 100.00. Assume the tax rate is 14.5%. The calculated tax decreases from 14.57 to 14.50, not a rounded figure. Add this to the rounded line item subtotal, and the invoice total is 114.50, also not a rounded number. So you have not achieved your objective.
(b) Whether or not you round off the amount you request from a customer on a sales invoice, the amount of tax owed to the tax authority is unchanged. If you repeat the process described above many times on a lengthy sales invoice, you could significantly alter the tax payable. If you repeat it on many sales invoices, the same thing could happen. You would never pass a tax audit.
Some tax authorities permit rounding of final numbers for an accounting period on returns or filings. They may allow rounding of receipts and payments to units of currency in circulation. But they will not allow accounting procedures that could produce cumulative miscalculation of tax obligations.
Remember, in Manager, the rounding differences do not disappear. They are posted to a Rounding expense account. A tax authority will not care that you lose or gain a little money on amounts you charge your customers (assuming you reflect this properly on reported income). But they will not permit you to alter what you owe them.
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Well i think you didn’t understand what i want to say.
The logic is that when the rounding subtracts from the total amount without affecting the tax, then you are paying some tax money yourself.
Thats ok with me because it’s only a small amount and we don’t have too many invoices every month. My accountant says that illegal though. Even if we are paying more tax than we should for every invoice.
Let’s see now the circumstances that you have to round up.
We want to charge 44,00 to a customer with rounding to nearest, so we have:
.
Now the rounding is 0,44 but for that money NO TAX is payed!!! It’s a no TAX receivable amount. And that’s Illegal and doesn’t have a logic also.
So we are forced to have a rounding category, take the calculator, and calculate the rounding by ourselves witch is 0,35483871:
and having it like this with 54,99 (its not 55 because manager is rounding tax by line):
And then we can enable rounding and add that final 0,01:
So now it’s only 0,01 so maybe if the TAX audit employee is “nice” he will not do anything. But the 0,44 without TAX is “something” and not “nothing”.
It will not be a big deal if manager rounded the subtotal without tax. Even if someone had different TAX items in various lines they should be like 2 different subtotals for each tax code, rounded in a way that their sum would be round after tax. It could round for example only the amount that needs the least rounding for a round total. It’s a big algorithm, i know… but it’s possible.
But not if you tick the “Tax Inclusive” box, enter 55.00 on the line item and the Invoice will total 55.00
And if you don’t know the 55.00 before hand, create the Invoice normally - determine the rounded amount required and then Edit the Invoice by changing amount and ticking the box.
@Brucanna just after 3 years (forum suggesged this thead), i am repling that …in Greece (probably and in other countries), tax inclusive invoices are illegal.
Then do not use them. In many countries they are not illegal. In some jurisdictions, they are required.
I don’t, fortunately, i didn’t found out the hard way.
But you are missing the point here, which is that manager should round after tax, for the reasons I explained 3 years ago, which are still relevant. Never mind though, it’s an old post after all, and i personally round before tax with a calculator if I need it.