USA Accrued Fed Income Tax

[AGH the CPA]

If my client has made estimated fed income tax payments quarterly where we
DR acc fed tax
CR bank

and then we allocate the expense monthly by
DR fed tax expense
CR acc fed tax

and then they determine that due to businesses losses they will not owe, whats the best way to remove the accruals/expense from their books?

 

[Drmdcpa]

If you do not actually receive a refund, reverse the transaction that books the expense.

If you receive a refund, post the deposit against the expense.

 

[AGH the CPA]

Did not receive the refund yet but will. Cant reverse the entry that booked the accrude fed tax because that was the check coming out of the bank and it will throw off the bank recon. Need to reverse OUT of acc fed tax but need to figure out where to put it. Some kind type of receivable?

 

[Drmdcpa]

Reverse the entry does not mean to cancel it or otherwise impact the original entry. It means to make another entry in reverse of the first.

For example, you originally debit expense and credit prepaid. Now you need to credit expense and debit prepaid. This will remove the expense and put the prepaid back on the books. When you get the actual refund it gets applied to the prepaid.