Some jurisdictions may require your clients to prepay a portion of their tax. Taxes paid this way are treated as a tax credit when the return is filed; for example, if taxes must be prepaid on their February return, they would pay part of the February tax liability when they file the January return. They would then claim the amount they prepaid as a credit on the February return.
Depending on the jurisdiction, your client might be required to include prepayments on the tax return forms they usually file (for states like FL, GA, and NC), on a separate form specifically for prepayments (IA, PA), or through an electronic payment directly to the tax authority (AR, IL, MO).
If your client makes a payment directly to the taxing jurisdiction, you must add the payment amount to the filing task before the locking deadline to ensure accurate reporting.
Before you begin
- Contact the client to see if they have received correspondence or a statement from the state concerning their prepayment obligation. Some states provide the amount they require to be prepaid in a letter, which includes a payment schedule
- Review the letter to determine the total amount and when the prepayments are due; states may require weekly, monthly, and yearly prepayments.
- Have the client's user ID and password on file as a part of the filing calendar's Frequency and Registration section
- Obtain from the client sufficient data history (usually a year) or equivalent (for example, other forms of sales data); you may use this data to determine the prepayment amounts
- Review how to set up prepayments for each state in Returns for Accountants
- Request a filing power of attorney
- In Returns for Accountants, go to Filing calendars > Filing calendars.
- Use the Filters pane to identify the company and region of the filing calendar.
Optional criteria can be included to locate the filing calendars you want to review.
- Find the fling calendar to which you need to add a recurring payment, then select ⋮ > Edit.
The filing calendar details page opens.
- Review and adjust the prepayment details in the Additional details section.
Returns for Accountants allows prepayments to be entered as either a flat dollar amount or a percentage of the total liability for the filing period, but some filing calendars require one format or the other.
- Select Save when you're done.
The prepayment amount is now automatically added to the liability summary at the end of each filing period.