Post Taxes: Distribute Tax to Retainage

This field is enabled only if you selected to post taxes on invoices (On Invoices box checked) andyou have checked the Calculate Tax on Retainage option.

Check this box to track retainage tax separately. Retainage is excluded from the tax basis and calculated separately as ‘retainage x tax rate’. The resulting amount is displayed in the Retainage Tax field (which displays only when this option is checked). When the invoice is posted, the retainage tax amount is updated to the Credit GL Retg Account specified for the tax code (HQ Tax Codes, Add’l Opts tab) and is not due for payment until the retainage is released. Once retainage is released, the retainage tax is moved to the tax payables account (the Credit GL Account specified in HQ Tax Codes, Info tab) and is due for payment.

Note: If you do not allow posting taxes on AR invoices, but do allow posting taxes on progress billings in JB and want retainage tax tracked separately, you will need to check this box. However, you can use the F3 function to hide the tax-related fields on the AR Invoice Entry form and then either set the Tax Code field to a Default Type of 2-Fixed Value with a Value of ‘blank’ or remove any tax code designations for customers in AR Customers or contracts (those not used in JB).

Leave this box unchecked if you are not tracking retainage tax separately. When entering invoices (in AR) and progress billings (in JB), retainage will be included in the tax basis and the full tax amount updated to the tax payables account (the Credit GL Account specified in HQ Tax Codes, Info tab) when the invoice is posted.

Important: Although allowed, it is recommended that you do not change this flag once you begin processing invoices and billings, as it can have a serious impact on this and other modules relative to input defaults and release retainage processing. If changed, a warning displays, but gives you the option to continue. Make sure you only continue with the change if you are sure it is the correct action to take.

If you check this flag after you have already begun processing invoices and billings, it will affect existing retainage that has not yet been released. When you release retainage, the system will calculate tax on the released portion. Since retainage has already been included in the invoice’s tax calculation, this results in the retainage being taxed twice. To prevent this from happening, consider processing existing retainage transactions before you implement this option. Otherwise, you will need to apply a negative adjustment to each released retainage transaction (in AR Invoice Entry).