Adding custom tax codes

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Tax codes are a set of predefined groupings that you can assign to specific general ledger accounts (via the Tax code field in the Setup > Chart of Accounts screen). You can generate reports that provide totals for each tax code, and you can use tax codes to bridge amounts to tax applications such as UltraTax CS. When you import custom tax codes into UltraTax CS, the application summarizes the tax amounts for import.

In addition to using the predefined tax codes that are included with the application and that are automatically available in the drop-down list for the Tax code field (based on entity type), you can define and then assign custom tax codes.

Notes

  • You cannot delete a custom tax code if it is assigned to an account or some other entity.
  • If you add custom tax codes and then move to a different year, the application will carry them to the new year only if you have not yet entered activity in that year. For example, if you create a new client record in the current year and subsequently move the processing period to the prior year and create custom tax codes in that year, when you move back to the current year, the application will not bring forward the custom tax codes created in the prior year.

Adding custom tax codes at the client level

Client-level custom tax codes apply to the currently selected client only.

  1. Choose Setup > Tax Codes, select the client, and click the Add button.
  2. Select the tax code from the drop-down list.
  3. Enter up to two alphanumeric characters in the Subcode field, and enter a description in the Description field for the new tax code.
  4. Click Enter to save the new tax code for the client.

Note: You can add Custom tax codes on the fly for a selected client, from the Setup > Chart of Accounts screen.

Adding custom tax codes at the firm level

Firm-level custom tax codes apply to any client of the specified entity type.

  1. Choose Setup > Firm Information > Firm Tax Codes.
  2. Click the Add button.
  3. Select the entity type and tax code from the drop-down lists.
  4. Enter up to two alphanumeric characters in the Subcode field, and also enter a description for the new tax code.
  5. Click Enter to save the new tax code for the firm.

Examples

The following scenarios illustrate the advantages of using custom tax codes.

Scenario 1

The chart of accounts for Client A (an 1120 client) includes several expense accounts for utilities and insurance. These expenses relate to tax code 213 (1120, Other deductions), but the client would like to be able to group these expenses as two items (utilities and insurance) for tax integration purposes.

Assigning these accounts to a single tax code (213) would yield unnecessary detail for both utilities and insurance in the tax export and in the tax reports. However, by assigning custom tax codes 213-1 - Utilities and 213-2 - Insurance, you can group all of the utilities expenses together as Utilities and all of the insurance expenses together as Insurance. In this way, you can provide the necessary summary information for these separate groupings within the tax export and the related tax reports.

Scenario 2

The chart of accounts for Client A is segmented to handle multiple locations or departments. You could import a single total for tax code 100 (1120, Gross receipts and sales) by assigning a custom tax code of 100-1 and using this code for all of the sales accounts in each department or location (segment). This will result in a single sales total without the detail from each department or location, as if only the core amount is imported.

Related topics

Tax code assignments for GL accounts

Assigning tax codes to multiple accounts

Importing account balances into UltraTax CS

Retrieving general ledger balances using tax codes (UltraTax CS topic)

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