would you like quick books help you calculate your estimated income taxes well in this video
you will learn how to make a profit and loss statement that includes only taxable income
if you have any questions about this topic you can leave them in the comments section below and i'll
do my best to help you and of course if you feel the video helped you i hope you will click like
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the time quickbooks can help you estimate how much tax to send in you can create a special
income statement in quickbooks that would only include your non-exempt includable income and only
expenses that the irs considers deductible this profit and loss statement will never be perfect
you will never calculate your taxable income in quickbooks exclusively but it will help you
estimate for your quarterly estimated income taxes you see the federal and state tax authorities
only expect an estimate when you send in your quarterly federal tax payments with a voucher
that looks very similar to this for federal taxes form 1040 es
requires that you take the numeric results from your bookkeeping and follow the steps
in the publication publication 1040es to find how much estimated taxes you need to send in
the safest thing you can do if you are keeping accurate home finance bookkeeping records
is to use the profit and loss for the specific fiscal quarter that you must send in the taxes
set the dates and the profit and loss the same way that we learned in the previous video compare
the net income for that month or quarter to the tax rate schedules that are included
in the publication and that's how you will know how much money to send in for estimated taxes
and if you do it that way you will be safe and send in an amount that will keep you safe
but remember you would only want to consider for those calculations taxable income
and taxable income is the result of two things your includable items of income
which they call non-exempt income which is only what you are required to include and report
the irs makes clear by creating publications what kinds of income should or should not be included
in your taxable income calculation you also have to know your deductions again the irs makes clear
by creating publications what kinds of expenses should or should not be deducted from your taxable
income calculation so you need to separate all your income and expenses into two types the income
should be split into non-exempt or exempt income and the expenses should be split into either
deductible or non-deductible income in short you either include the item in your tax calculation
or you do not include the income and or expense item in your tax calculation
so you need two separate profit and loss statements in order to accomplish this one
that has only tax return items that are includable on the return and another income statement
that includes everything all incumbent expense items now you may well ask what are classes
well classes are a way of tracking accounting information into helpful to manage categories
you must activate class tracking in the account settings window then you put in a list of classes
for all the classes that you need we only need two the first class will be called non-exempt income
slash deductible expenses and the other class will be exempt income slash non-deductible expenses
and we will choose the class each time we record a transaction then we will open the profit and loss
by class report and that report at least for the class in blue non-exempt and deductible that re
that profit and loss by that particular class will give us a decent estimate of our taxable income
for the year so let's go ahead and add those classes first we have to activate class tracking
in the account settings window we click the cog wheel and we go over to account and settings
you must click the advanced category and scroll to the section of categories and you see in the
category section there's track classes and track locations click the pencil tool to open it up and
this button here in the row of track classes click on it and you will have activated class tracking
by the way there is no difference between one entire transaction and one class in each row i
have experimented and there is no practical difference we don't want quickbooks online
to annoy us if we choose not to put a class in a transaction so leave that blank
click save and then in the bottom right of the account settings window click done
now you will notice there are some things that have just been added
to your quickbooks online for example if you click reports and you go to standard you will
now see in the business overview section another report added to this list profit and loss by class
let's double click let's click the pull down and choose all dates run report
save customization let's leave the name profit and loss by class and click save now when we click
reports custom we see that profit and loss by class has been added to the custom reports section
you will also notice that quickbooks online added the class list to the list of lists in quickbooks
online if you click the cogwheel and go over to lists you will not see the class lists but
if you then click all lists you can see that classes have been added to the list of lists
for you to put in your class list double click and you see the list window looks very similar
to all the other list windows in quickbooks online the name of the first class is non-exempt
excuse me non-exempt income slash deductible expenses so we click new non-exempt income
slash
deductible expenses and save and now you can see that has been added to the list
click new and the other name is exempt income and non-deductible
expenses
and then we click save and now we have our two classes and we're ready to assign classes
to each of the existing transactions now let's assign classes to the existing
transactions you would normally record the class at the moment you record the transactions
we must add a class to all prior transactions so the profit and loss by class will be clear
i will show you some then i will pause the video and finish you can pause the video as well and
we will compare reports so let's imagine that only landscaping in income is exempt and only vet bills
are not deductible well what would you do well you would double click your regular profit and loss
now watch i'm going to open landscaping income and make everything exempt double click
and there are only three landscaping transactions
so it should only take a few seconds to make them exempt double click the first one
and now you see what quickbooks online did it added a column for class uh in this transaction
now unfortunately to see class the scroll doesn't seem to work so i think i have to make the window
just wider there it is there's the scroll bar class now again click here where it's
for class okay it's not lined up right but this is your list of classes and this is
exempt income and we click save and close and now we do the second one double click and now
luckily the scroll bar is here so we move to the right click class this is exempt income save and
close let's do the third landscaping transaction double click scroll to the right click for class
this is exempt income save and close now unfortunately if you click the back arrow
yeah you go back to the transaction so you have to click reports profit and loss
you must do the same thing to bartending income double click
but bartending income is not deductible and includable income double-click the first one
and then make this class the class that we include non-exempt income save and close
double-click the second one in bartending income scroll to the right click under class
this is non-exempt income save and close double-click the third one scroll to the right
click class click the pull down arrow non-exempt income save and close
now your income is all classified click reports and now you have to do the same thing in the
profit and loss but you have to do it with each expense now vet bills are the only ones
non-deductible so i will show you vet bills and i will start you with telephone expense and you will
put the rest in classes double click vet bills now there's a bunch of them so i'll only do a couple
but after you do the vet bills you have to do all the other expenses because all the other expenses
are non-deductible i double-click dr kirk the first one and i choose class non-deductible exam
is the name of it save and close go to the next one double click
class none deduct sorry non-deductible save and close
now you should finish the rest i'm going to pause the video and i'll not only finish the
rest of the vet bills making them uh non-deductible but i'm going to make
all the other expenses deductible and then i will show you the profit and loss by class
so when you're finished you should click reports profit and loss by class
and you should see in the exempt income and deductible expenses this excuse me exempt income
and non-deductible expenses these numbers mean nothing the most important column is this column
non-exempt income and deductible expenses this is income that you must include and
expenses that you can deduct so this this would be an estimate of your taxable income
before filing your taxes and filling out the forms because it includes all of your income sources
that you must include and it only deducts expenses that you are allowed to deduct so
this would be the column that you would use to send in your estimated quarterly taxes
you