[Question] Sole Proprietor Y/E Accounts - Where do you post Provisional Tax payments?

[FanAnn]

Hi,

I do the books for my husband on Pastel Accounting - he is a sole proprietor and pays provisional tax twice a year. These payments I capture to the Vat/Tax Provision Account.

What journal entry would I post to clear the Vat/Tax Provision Account balance for the new financial year?

Credit Vat/Tax Provision Account (B/S)
Debit Normal Taxation (I/S)

Would this be correct?

Thanking you in advance

[Kevin Smith]

Leave the provision as is for now. You need to complete his tax return. Once the tax has been assessed and you have the actual tax figures, DR normal tax (IS) and credit the provision for that amount. If you have overpaid, when SARS refunds the balance, Dr bank Cr provision. If you have underpaid, Cr bank Dr Provision - provision account should clear to nil. You will raise the tax as "last year" entries in your current books, and the cashbook pmt/rec in the current year, when the refund/payment is made.

[FanAnn]

Hi Kevin

Thank you for your help! I have made the journal entries for last years tax according to your instructions so only have this years prov tax reflected.

Another question....is it usual for SARS to not refund an Income Tax overpayment - they owe us R11000.00 odd according to the ITA34 but have not refunded this amount? I have carried it forward into this tax years figures as a credit in the tax provision account.