Tax Adjustments

A Tax Adjustment is used when posting directly to a tax GL account and you need the entry to be reflected in tax reporting. 

Example: if you entered a supplier invoice but forgot to make it taxable, you can correct the tax by creating a journal entry. On the line posted to the tax GL account, you can enter a tax adjustment and specify whether it is input tax or output tax. You then enter the tax amount being adjusted, along with the taxable amount the tax relates to.

Tax Adjustments:

• Do not calculate tax
• Requires entry of both the tax amount and related taxable value
• Ensures the journal is included correctly in Tax Reports

Use Tax Adjustment when:

• Recording tax outside of standard invoice workflows
• Correcting previously missed or misstated tax
• Posting directly to a tax GL account for reporting purposes

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How to create a Tax Adjustment:

When entering a journal use Dissect option to enter:

• Tax Adjustment Type: Output or Input
• Taxable Value: The amount that is taxable
• Tax Code

** if the original transaction was $5,000 and the tax should have been $50, you would post $50 to the tax GL account in the journal and dissect that line to record a tax adjustment showing that the tax relates to a taxable amount of $5,000.

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Reporting Behavior

• Journals with Tax Adjustment → appear in Tax Reports
• Journals without Tax Adjustment → appear in GL Reports only

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Key Principle

Journal entries are direct GL postings, not tax-driven transactions.
Tax Adjustment ensures manual tax entries are properly reported.