What do you do if order invoices come in after you have already filed sales tax? Correcting tax errors can be stressful, but it is necessary in order to keep your company from suffering penalties or fines. If you discover you have insufficiently paid sales tax the best course of action is to self-report the mistake. In many cases, if the business comes forward with the mistake, a request for a waiver of penalties due to reasonable cause can be made.
How To Resolve Payment Errors
By law, a business is not allowed to keep any income that comes from filing errors. An Application for Abatement/Amended Return must be filed in order to report any decrease in tax or any increase in tax in most states. In the case of underpaying sales tax, full payment should be made with the filing of the amended return.
If you fail to self-report sales tax errors you could be audited and face penalties, fines, and interest on unpaid sales tax, on top of the costs of being audited. Auditors will often audit only a section of your books and will assume the error percentage is the same throughout. This means if that section has an error average of 45% you will be penalized at that percentage even if that section was the only section with errors. So it is beneficial, to be honest and forthcoming with errors, especially those which are easily corrected.
In most states, to file an amended return you will need to follow steps similar to these:
Make a copy of your original return, or for electronically filed returns, copy the “Confirm Filing” page and any applicable schedules.
Write “AMENDED RETURN” at the top of the form, check the appropriate box, or use an amended return form.
Write in the correct information that should have been reported on the original return.
Attach a cover letter explaining the changes made to the original return.
Make a copy of the amended return for your records.
Mail all documents, including any additional payment owed, to your state’s preferred address.
Amendment filing processes differ slightly from state to state so check your state’s amendment instructions and act accordingly.
Steps To Correct Sales Tax Errors
Late invoices are just one of many errors that can occur when filing sales tax. Here are a few actions that can help eliminate common errors.
Check for sales tax errors before filing: An ounce of prevention is worth a pound of cure. Periodically conducting self-audits can help eliminate sales tax errors before they occur. Not only will self-audits save you money, but in the long run, it can also help your staff be more cautious when performing sales tax accounting tasks and completing sales.
Keep up with changing sales tax laws: Sales tax laws are always changing. Sales Tax DataLink’s DisclosureLINK can check jurisdiction accuracy for past returns and make sure you charged and paid the correct sales tax.
Always be prepared for an audit: Businesses that catch errors should be prepared in the event of an audit. Having the correct documentation, certifications, and up-to-date software can make the process go much smoother and keep audit costs to a minimum.
Human error, when it comes to sales tax, is an all too common occurrence. The good news is that errors are fixable and, with the correct software and diligence, errors can be caught before any real financial damage is done. Sales Tax DataLink strives to help our consumers efficiently and accurately run the financial side of their businesses. We offer a free evaluation to help you catch any mistakes on your sales tax forms and see what a difference our software can make.