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Amending a Sales Tax Return: What You Need to Know

  • Dec 1, 2016 | Stephanie Faris

With so much to manage on a daily basis, it can be easy for a business to occasionally make errors. When those mistakes involve tax reporting, professionals may feel an impending sense of doom, certain that they’ll face a complicated process to make a correction.

The truth is, in many states, the process isn’t complicated at all. Many states even allow businesses to amend their returns electronically.

Here are a few things every business should know about amending a sales tax return.

Research Your State’s Process

As soon as you realize your sales tax return has errors, you’ll need to look up your state’s amendment process. Each state has its own requirements, often involving simply resubmitting the original document with the correction. In some states, though, an amended tax return goes through a different process than the original sales tax submission procedure, so it’s important to carefully review the laws specific to your own jurisdiction.

One mistake many businesses make is in only completing the corrected portion of the sales tax return. In many states, your amended return will replace your original return, so it’s important to fill out the return completely before submitting. Otherwise, your paperwork may be flagged as incomplete, leading to delays and penalties. Make sure you follow the processes your state has in place to designate your return as an amended version, whether this means checking a box or writing the word “Amended Return” at the top of the first page.

Correcting Monies Owed

Often the corrected sales tax return will involve a new dollar amount from what was previously reported. This may mean the state owes you money, in which case you’ll need to request a refund. This will require a separate refund request, which will ask for a full explanation of your claim. Include any documents you have that support your claim of overpayment. Be aware that some states limit the number of years you can claim overpayment, which means if you delay in pinpointing and reporting overpayment by two years or more, you may not be able to claim a refund.

In many cases, your error will be connected to an underpayment, requiring you to submit funds in addition to what you’ve already paid. It’s also important to act swiftly when you’ve underpaid, since you may be subject to more penalties and interest payments as time passes.

Even if you used an accountant, you’re responsible for paying the back taxes. Forward the amount you owe immediately, along with your amended sales tax return, and wait for further instruction. You’ll likely be asked to pay interest in penalties after you’ve submitted your sales tax, but it’s important to remit the money quickly to avoid additional interest accruing.

Amending Multiple Returns

In some cases, businesses realize they have errors in multiple tax reporting periods. This can happen due to an accounting mistake or a discovery by a new accountant.

It may seem complicated to submit claims for multiple tax periods, but some states have made it easier, thanks to electronic submissions. In Minnesota, taxpayers can amend multiple returns in one place through the taxpayer portal. Washington provides a schedule of amended figures to those who need to fix multiple tax periods, allowing businesses to either submit the changes electronically or by mail.

For some businesses, the process is complicated by the fact that they may have filed multiple sales tax returns for each location. Amending each of those can be challenging, since they’ll need to backtrack to file an amendment at each location.

Some states allow businesses to mass-upload amended returns for various locations, but states like Colorado specifically require taxpayers to amend each one separately. Some states, like Illinois, let businesses file sales tax returns for multiple locations using one form and therefore amending a location simply means completing a similar form. The good news is that you won’t need to amend sales tax returns for the areas where you paid your taxes correctly during those time periods.

If your business discovers a sales tax return needs to be amended, it’s important to take action as soon as possible. Research your state’s requirements and follow them carefully, ensuring that your amended return is correct before submitting. By submitting the amended return quickly, you’ll be able to limit the amount you may have to pay in penalties and interest.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Stephanie Faris
Avalara Author Stephanie Faris