Amending a Sales Tax Return
- March 9, 2015 | Ryan O'Donnell
They say "perfection is the enemy of done", but when it comes to sales taxes, perfect isn't a 'nice to have', it's a requirement. If you find you made a mistake or left something off your return, you are required to correct the mistake by filing an amended sales tax return.
Let's take a look at what it means to amend a sales tax return and what impact it has on your current tax situation. We'll cover three key points: filing a new return, requesting a refund on an overpayment, correcting an underpayment, and what to do if you're an e-filer.
You're Filing a New Return
First, it is important to recognize when a taxpayer files an amended return it replaces the original return. That means, the taxpayer must be certain to fill out the amended return completely. Otherwise, you'll find yourself with another incomplete tax return on the books and interest payments on outstanding sales tax accumulating.
Make sure your documentation is error free and all required fields are completed. If your filing a paper return, it's also a good idea to have copies of all supporting information collected and organized. Filing an amended return may increase the chance of an audit so now is the time to prepare.
Refunds and Lookback Periods
If you think the state owes you money be aware that most states will only let you request refunds a limited number of years into the past. Virginia and New York are examples of two states that limit the look back period to 3 years. The length of the lookback period for sales tax refunds is different for each state.
Most commonly, taxpayers discover they underpaid their sales tax and now owe the state an outstanding balance. This should be cleared up quickly because, as previously mentioned, most states charge a penalty plus interest on the amount owed. The sooner you can get this cleared up the less it is going to cost you.
Most states want you to send a corrected copy of the return with the word "Amended" written across the top of the first page. Cross out the incorrect items on the return and in black ink write in the correct amount. Include a cover letter explaining your situation. The most important thing is to send money to cover the sales tax you owe to the taxing authority even if you don’t know what the penalties and interest might be. This stops additional interest on the money owed from accruing while you work out the details with the state. Make a copy of the amended return and keep it with your supporting documentation.
E-Filing and Paper Returns
Electronic filers may be able to rescind their incorrect filing by contacting the state taxing jurisdiction on the same day and asking them to cancel the return. Refer to our state tax guides for specific contact phone numbers and addresses (if you want to visit the office). You can then refile the return without filing an amendment. Again, this varies by state.
Online sales tax filing forms for some states offer an option for submitting an amended return. Typically, it involves checking a box on the form to indicate an amended return. Other states do not offer this option. Taxpayers in such states, regardless of whether their initial filing was done electronically, must file their amended return through the mail with a paper form. California and Alabama are two such states. The process is so manual, taxpayers are asked to write (by hand), "AMENDED RETURN" across the top of the form.
If you are struggling with your amended return, most states have a help number you can call to walk you through the process. Documentation is key. Always make copies of your returns, even electronic.