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Understanding Tax Reporting with Teesom and Square Integration
Introduction:
In this article, we will discuss how the integration between Teesom and Square works in terms of tax reporting. We will explain why invoices are taxed and not payments, and how this affects your 1099-K reporting when using Square as a payment processor. This information will help you accurately report your taxes and ensure you have a clear understanding of how Teesom’s integration with Square functions.
Why Invoices Are Taxed and Not Payments:
From an accounting perspective, sales taxes are applied to invoices and not payments. When an invoice is generated, it includes both taxable and non-taxable items, as well as any applied discounts or promotions. The tax is calculated based on the taxable amount, which is determined by the invoice line items.
When a payment is applied to an invoice, it may cover only a portion of the taxable amount. In such cases, it’s unclear which part of the payment is applied to the taxable amount and which part is applied to the non-taxable amount. This is why it’s important to report taxes based on invoices rather than payments, as the invoice contains the detailed breakdown of taxable and non-taxable amounts.
Teesom's Integration with Square:
Teesom integrates with Square solely as a payment processor. When Teesom sends a payment to Square, it only includes the total payment amount and does not provide a detailed invoice breakdown containing tax information.
As a result, Square cannot determine the tax breakdown for your 1099-K reporting, as they will show all payments sent to them as total revenue without separating the tax. This means that using Square’s reporting for a breakdown of sales tax is not accurate.
Accurate Tax Reporting with Teesom:
To ensure accurate tax reporting, we recommend using either Teesom’s sales tax report or integrating with QuickBooks. Teesom’s sales tax report provides you with the necessary tax information based on the invoices generated in the system.
When you integrate Teesom with QuickBooks, both payments and invoices are sent to QuickBooks. Since QuickBooks receives the detailed invoice information, including the tax breakdown, it can accurately report taxes for your business.
Avoiding Federal Tax on Sales Tax:
By relying on Teesom’s sales tax report or integrating with QuickBooks, you can avoid paying federal tax on the sales tax included in your gross sales. This is essential for accurate tax reporting and maintaining compliance with tax regulations.
Conclusion:
Understanding the relationship between Teesom and Square in terms of tax reporting is crucial for your business’s financial management. Invoices, not payments, are the basis for accurate tax reporting. By using Teesom’s sales tax report or integrating with QuickBooks, you can ensure the correct tax breakdown is reported and avoid paying federal tax on the sales tax included in your gross sales. If you have any further questions or need assistance with integrating QuickBooks, please reach out to our support team.