Overpayment Of Taxes Due To Cancel/Rebills

Let’s assume a cancel / rebill occurs after a payment is received and the net effect of the cancel / rebill is that the customer has overpaid their taxes.


Event	GL Accounting	Tax Payable Balance	Tax Holding Balance
Bill segment created	A/R 110 Revenue <100> Tax Holding <10>	0	(10)
Payment received	Cash 110 A/R <110> Tax Holding 10 Tax Payable <10>	(10)	0
Cancel	A/R <110> Revenue 100 Tax Holding 10	(10)	10
Rebill	A/R 27.50 Revenue <25> Tax Holding <2.50>	(10)	7.50

You'll notice that the amount payable to the taxing authority still indicates $10 (the amount of tax that was paid by the customer). However, you'll notice that the tax holding balance is 7.50 (debit). This looks a bit odd, but it's correct. Remember that at this point, the customer has a credit balance of $75 and this will be whittled down as successive bills are produced as shown below. Note: refer to Cash Refunds for an example of what happens if you refund the credit with a check rather than letting it whittle down.


Event	GL Accounting	Tax Payable Balance	Tax Holding Balance
		(10)	7.50
Bill segment created	A/R 55 Revenue <50> Tax Holding <5>	(10)	2.50
Bill segment created	A/R 110 Revenue <100> Tax Holding <10>	(10)	(7.50)

In the unlikely event of a payment being received while the tax holding has a debit balance, nothing will be done in respect of transferring funds from holding to payable (there is nothing to transfer).