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Washington Apportionment Reconciliations Due October 31st

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Businesses that report revenues under the Service classification or one of the other apportionable categories (see link below for list) may be eligible to apportion the revenues taxable in Washington. As part of this process, an annual reconciliation is due for the prior calendar year by Oct 31st of the following year.

Recently we have become aware that the Department of Revenue has been interpreting this filing to be a required return. Therefore, if a business fails to file the reconciliation, additional penalties (up to 29%) can apply to any amounts later found to be due (such as in audits). We recommend all businesses reporting revenues under an apportionable classification file this reconciliation, even if there are no changes to their reported amounts.

Background

Businesses reporting revenues under specified classifications that are subject to tax in multiple states can apply an apportionment percentage to their total revenues to determine the amount taxable in Washington. While this calculation is on a full year calendar basis, most businesses report to Washington on a monthly or quarterly basis. Since the full year revenues aren’t known at filing, the business can either determine this apportionment percentage based on the current period, or use the prior year’s percentage. Once the full year’s revenues are known (as well as where the company will file state tax returns) a reconciliation is done to reconcile the reported amounts to the full year calculated taxable amounts. The reconciliation for 2016 is due Oct 31, 2017.

The reconciliation can be filed online through the business’ Department of Revenue (DOR) account or via mail if unavailable. There are no penalties assessed on any additional tax due if the reconciliation is timely filed (but interest applies). If there are no changes to report, the business can file the reconciliation through their online account (select “file a return” from the left hand menu and select “reconciliation of apportionable income”) and follow the instructions to indicate no changes.

Additional information on apportionment and the reconciliation can be found here.

If you have any questions or need assistance with the reconciliation, please contact your Berntson Porter representative at 425-454-7990. We’re here to help!