Reconcile between the 1st and 10th of each month following the close of last month's filing period. For example, reconcile May's returns between June 1st and June 10th. Only reconcile after all transactions and changes for the current filing period are added to AvaTax Update, and remember that it takes thirty minutes for data from transactions to show up in reports.
Review and approve your scheduled returns between the 5th and 10th of each month. The record for a state is locked for that month once it's approved, and Avalara begins generating tax returns.
If you need to edit your scheduled returns, make sure that you make any changes before the last day of the month prior to the one in which the changes are going to occur. For example, if your filing frequency changes in April, update your returns by March 31st.
For more information, learn how to schedule or edit returns, or take an Avalara University course on the subject. Make sure to pay attention to any new regions where you might need to start filing returns, as well.
Review tax liabilities
- Go to Returns > Manage and Approve Returns to review tax liabilities for your company. If you don't see the numbers that you expect for a jurisdiction, click to fetch the most up-to-date transaction data and rebuild the return
- Click Manage Returns next to a jurisdiction to see the:
- Return form names or numbers
- Frequency each form is filed
- Total sales and taxable sales activity for the month
- The amount of tax calculated
- The amount of sales tax that has accrued for the filing period and is due to be remitted
- The details page shows returns that are being filed for the current month in the selected jurisdiction. Quarterly, semi-annual, and annual returns appear here during months when they are due. Click Returns Accruing For a Future Filing Period to see those longer-term returns during interim months.
- Click Tax details and adjustments next to a return on the jurisdiction page to see more information about that return. The Tax Due Avalara section lists the total amount you remit to Avalara, and the Remittance to Tax Authority section describes the total amount Avalara remits to the jurisdiction. In certain circumstances, these numbers might be different from each other. For example, if your return is eligible for an early filing vendor discount which doesn't end up being applied before funds are drawn from your account to pay your tax liabilities, Avalara carries that discount over to your next return. In general, the calculations for Remittance to Tax Authority include vendor discounts for the current filing period, while Tax Due Avalara includes discounts and credits carrying over from the previous period.
- "Accrual" amounts display instead of remittance during interim months if your company files quarterly, semi-annually, or annually.
Reconcile returns and your general ledger
Run the reports in your accounting software that work for the types of returns you're filing. If you need help with these reports, find instructions in your accounting software guide. Compare these reports with the Manage and Approve Returns page in AvaTax Update under Returns > Manage and Approve Returns. Your returns are reconciled with your accounting software transactions if the tax liability totals in AvaTax Update match the totals in your accounting software.
If the numbers don't match:
- Compare AvaTax Update reconciliation reports to your accounting software reports and reconcile any discrepancies.
- If a transaction in your accounting software isn't in AvaTax Update, import the missing sales tax or consumer use transaction, or void the transaction in your accounting software.
- Similarly, if a transaction in AvaTax Update isn't in your accounting software, add the transaction to your accounting software or void the transaction in AvaTax Update.
Reconcile returns and AvaTax Update transactions
Sometimes, the amount of tax being remitted on your scheduled returns might not match up with the amount of tax calculated from your transactions. This could be because of something benign, like vendor discounts and carryover credits, or it could be because of an issue that would cause an inaccurate filing, like a return form that's been set up incorrectly. Reconcile your scheduled returns with your transactions in AvaTax Update to identify any discrepancies and make sure your returns are accurate.
Reconcile by comparing a liability worksheet summary report and a sales and use tax summary report. The sales and sellers use tax summary report shows the total sales and tax for transactions in a selected date range, and the liability worksheet state summary report shows a summary of your tax liability for the same period. Between them, the numbers in the Amount Due column in your liability worksheet summary report should equal the numbers for each corresponding state in the Tax Amount column of the sales and use tax summary report. Any difference in these numbers indicates a discrepancy that you should look into.
If you find discrepancies between these reports:
- Make sure you've set up a return in the jurisdiction. Taxes collected in jurisdictions where you haven't registered to file are excluded from your returns - even if you've told AvaTax Update that you're collecting and remitting tax in that jurisdiction, and collected tax on those transactions. As such, the sales and use tax summary report may show a tax amount while your returns and the liability worksheet summary report show nothing due. Any calculated tax from a region where you haven't set up a return is sent into accrual and not reported until you schedule a return in that jurisdiction.
- Check the filing frequency. Any return that is filed quarterly, semi-annually, or annually will have additional sales tax not captured in the monthly report. If this is the cause of a discrepancy, Returns usually shows larger numbers than the reports do. If you suspect quarterly, semi-annual, or annual filing might be the cause of a discrepancy, you'll need to run the sales and use tax summary report for the entire filing period rather than a single month. Check the filing frequency for a return by going to the Manage and Approve Returns page and clicking Details next to the relevant state.
- Look for vendor discounts and carryover credits. The sales and use tax summary report doesn't capture some elements of your returns, including vendor discounts and credits that may be excluded from one period and applied in another. Check for discounts and credits if there are discrepancies between transactions in AvaTax Update and Returns that can't be explained by filing frequency or a lack of scheduled returns.
- Check to see if the remittance value was rounded. Sometimes, Returns rounds remittance values up in order to be absolutely certain that we're remitting the correct amount of tax on your behalf. In these cases, the rounding difference is carried over to the next month as a carryover credit.
Add or adjust prepayments, prior payments, and other tax liabilities
Manage your company's tax liability adjustments resulting from prior tax payments, tax prepayments, vendor discounts, and other adjustments through Returns.
- Go to Returns > Manage and Approve Returns, and click Details next to the region where you want to adjust tax liabilities.
- Click Tax details and adjustments next to the return you want to adjust.
- Expand the Adjustments to taxes and fees and Adjustments to remittance sections to view your tax liability adjustments. To edit a prepayment, prior payment, or other adjustment number, click the edit button next to the line that you want to change. To add a new prepayment or prior payment, click Add adjustments.
A prepayment is a payment remitted in addition to your tax liability, while a prior payment is a payment you've already paid on your own. Prepayments add to the amount due, while prior payments subtract from it. Vendor discounts and credits are normally handled by Avalara on your behalf, but you can also manage them as prepayments or prior payments as well.
If you have recurring prepayments or prior payments in a jurisdiction, automate them with prepayment forms so you don't need to make manual adjustments every filing cycle.
Reconcile consumer use tax
Consumer use tax is added to some returns depending on the specific return form being used, and how the relevant purchase invoice or inventory transfer documents were created. If you don't see consumer use tax added to your return, or the amount is different from what you expected, figure out what caused the discrepancy to determine if you need to do anything about it.
First, go to Manage and Approve Returns and refresh your returns. Recent transactions might not have been showing up on the page yet. If there's still a discrepancy, there's a handful of things to check next:
- On the details page listing all the returns you're filing in a region, check and make sure the return you're filing includes consumer use tax
- If you're reviewing a return that has already been filed, or if you've already approved a current return before noticing the discrepancy in consumer use tax, check the dates of any recent transactions that involved consumer use tax. Transactions received by AvaTax Update after the return is approved aren't included on the return.
- If you have a quarterly return with monthly prepayments, transactions added after the prepayment is reported aren't included on that prepayment, and are instead reported on the quarterly return
- Check for tax amount or accrued tax amount overrides on your transactions
- If you've overridden the tax amount on a transaction, AvaTax Update assumes you've already paid that amount of tax and doesn't include it on your returns (for example, if AvaTax Update calculates that the tax is $7.00 on a transaction where you overrode the tax amount for $5.00, Returns remits $2.00 on your behalf instead of $7.00)
- If you've overridden the accrued tax amount on a transaction, AvaTax Update includes the accrued tax on your returns without adding to your total taxable sales (for example, if you owe $10 of taxes on $100 of sales and override the accrued tax amount on a $20 transaction, your reports would say that you owe $10 on $80 of sales)
- Check for carry-over credits and vendor discounts that may have reduced the amount of tax you need to pay on this return
- Check the filing frequency of the return. If it's in the middle of the filing cycle, then the return shows tax collected but nothing due.
- Check if the return is associated with a location code. If it is, then transactions without that location code aren't used on the return, and you won't see the tax from them.
Approve the returns for a state
After reviewing and reconciling your company's tax liabilities, approve all scheduled returns. Once approved, the record for a state is locked for that month so Avalara can begin generating tax returns. Avalara approves your returns automatically on your behalf after the 10th of the month if you don't approve them manually.
To approve your returns, go to Returns > Manage and Approve Returns and click Approve next to the regions where you want to approve returns. Alternatively, click Approve All Returns to approve every scheduled return.