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.
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.
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).