All Forum Posts by: Mauricio Duarte

Is anyone familiar with tax filing and withholding requirements in the state of Ohio for house flippers (in an LLC)? More specifically, I'm reading about the two Ohio requirements below for businesses and wondering whether they apply to house flippers or whether there are exceptions.

My partner and I just started last year and our gross receipts were $250k.

Any help would be greatly appreciated.

Oh. Rev. Code Sec. 5747.41General rule is LLCs must withhold, and pay to the Ohio Treasurer, an amount equal to 5% of the distributive share of income, gain, expense or loss allocable to individuals.

Dan, how do you set up the report to view all sold properties as a % of net income? Is there a report for that or do you need to customize one? If the latter, how?

Yes, I’m using QBO Plus. I did delete the AP transaction. It’s stupid and didn’t solve my problem. 

I ended up doing exactly as you stated above. However, although the Bank Deposit posts to the P&L and everything is kosher there, it doesn’t post to the “Expense” screen. So, if I originally purchased something at Home Depot for $100, the Expenses screen shows my expenses for the year as $100. If I return that item and create a bank deposit for $100, the P&L is all good. I have an expense (debit) in, say, account COGS > Bathroom Fixtures for $100 which is then offset by a bank deposit that I indicated should hit COGS for $100 (credit). P&L impact is zero. HOWEVER, this does nothing to the “Expenses” screen. That original $100 expense is still there, it’s not offset by anything. So I’m still showing total expenses for the year as $100, when that’s not actually accurate. Make sense? I don’t think there’s a way around that.

They should rename the “Expenses” screen to “Transactions” or “Journal” and everything should be posted there—debits and credits. 

If there’s a workaround I’m missing, by all means let me know. :)

As for the estimated income taxes, there’s no gain until I actually sell the house, at which point everything would be in COGS anyway—under your method or J Scott’s method—so I’ll know how much net income was generated and can easily estimate income taxes. I don’t see the problem there.

As a matter of fact, using the COGS method, I can generate a P&L by Property at any time. You can’t do that when all your costs are on the Balance sheet. I tried. That report doesn’t exist—at least not for QBO Plus.

@Gita Faust, not sure why tagging doesn’t work sometimes on this forum. 

@Gita Faust,

Accounting wise, I completely agree with what you’re saying. But I don’t see how it can easily be accomplished in QuickBooks. So help me understand how this would work.

Let’s say that I spent $500 on Tile at Home Depot and I initially put it to WIP Inventory > Tile. Now when the house sells, I post a journal entry to move that $500 to COGS. But I want it to go to COGS > Tile so that I can see that same breakdown on the P&L (so that I can, say, create a budget later on if I need to).

In order to do that, I’ll have to post the following journal entry:

Dr. COGS > Tile  $500

Cr. WIP Inventory > Tile  $500

But let’s say I’ve spent $30k on this rehab and I have two dozen different accounts in WIP (tile, carpet, drywall, etc.) Are you telling me that I’ll have to post god knows how many different journal entries to move all of these transactions from one account in Inventory to a corresponding account in COGS? That’s INSANE! That’s why I’m saying it’s too much work for very little return. 

Hard money lenders don’t want to see my accounting records. They care about the asset and how much money I have in my checking account. I won’t be hiring a CPA to do my taxes. I’ll be doing them myself (I am a CPA). So at any point in time, I know where the business stands. I know that expenses are overstated and assets are understated. No one else is looking at that info but me anyway. Why would I put myself through the trouble of posting all these different journal entries to move dozens of transactions from Inventory to COGS just to follow proper accounting that no one will see?

If that’s not how QuickBooks works and there’s an easy way to easily flip (pun intended) all these transactions from Inventory to COGS with the push of a button, please enlighten me. I’m new to the software and would love to learn.

@J Scott, it looks as though you're using a Desktop version of QuickBooks. Is that correct?

I'm using QuickBooks Online. On QuickBooks Online, they have an Expenses screen which shows all of your expenses to date. When you purchase an item (I'm using a checking account for all my transactions, not a credit card) and then later return it, there's apparently no way (as far as I know) to post a return/refund transaction so that the Expenses screen appropriately reflects your total expenses for the year. So if your total expenses on the Expenses screen is $1,000, but you return an item for $10, you'd expect your total expenses to now show $990. Well, it doesn't because there's no way to post a return/refund. So it still shows $1,000. Expenses are essentially overstated, even though the P&L is correct (when I download transactions from the bank, it allows me to tell which account on the COA I want the credit to post to, but the Expenses screen doesn't update).

Journal entries also don't show up on this screen. It's weird. I've spoken to customer service about it. I might just switch to a desktop version after this flip. Is that what most people use?

@J Scott, how do you account in QuickBooks for an item that you purchase, say, from Home Depot, but later returned? I posted a different thread but have not received a reply. QuickBooks customer support has been no help either.

Here's the thread that explains the issue a little better: 

https://www.biggerpockets.com/forums/67/topics/716...

I'm new to QuickBooks and need assistance accounting for item returns. Here's an example of what I'm struggling with:

Let's say that on 5/27 I purchased an item at Home Depot for $10 which I assigned to a COGS category. My total expenses on the "Expenses" screen was $1,000 at that point. The next day, I returned that item to Home Depot. A few days later, I download bank transactions and this return/deposit shows up. I assign the deposit to COGS in order to offset the initial purchase on the P&L. However, this transaction does not show up on the "Expenses" screen. Instead of showing total expenses of $990, I'm still showing expenses of $1,000, which is not an accurate representation of my expenses, even though the P&L DOES balance.

I searched the Web and found that it is possible to assign the bank deposit to Accounts Payable (instead of COGS). Then, create an expense or check on the Expense screen and attach the deposit to it. This creates a credit transaction on the Expense screen. However, when I look at the chart of accounts, the whole thing is done via the Accounts Payable account. The initial $10 I charged to COGS is still sitting there. The Expenses screen balances, but the P&L does not.

What am I missing? Is there a way around this? For those of you who charge your rehab expenses for flips directly to COGS, how do you handle item returns to ensure they are appropriately reflected on the Expenses screen?

Thanks for your help.