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Monitor and apply carryover credits

A return can't be filed if it has a negative tax liability. This is the result of products or services returned to the company during the month. Managed Returns for Accountants identifies those transactions causing the negative liability and hold them back from being included in the current month’s return. These transaction amounts are then carried over to the next month. Each month, the system reviews these held back transactions and attempts to apply them to an appropriate return where sales is enough to cover any of the transactions. This way the return has a positive liability.

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Note

Carryover credits can be applied one transaction at a time as the gross sales support the transaction amounts. If you have a carryover credit that won't be applied for the foreseeable future, it is recommended to amend original return.

Carryover credits have a limited life, so it’s important to understand how each state deals with them. Once the statute of limitations for a carryover credit is reached, the company can no longer use that transaction in a return. One solution to losing the carryover credit is to file an amended return.

You can track carryover credits by running the Liability Carryover Credits report in Managed Returns for Accountants.

Before you begin

Research the rules and statute of limitations governing how the states deal with carryover credits. 

Steps

  1. Regularly monitor the carryover credits associated with your clients by going to Managed Returns for Accountants > Reports tab and running the Liability Carryover Credits report.
    • If you or your client are going to make entries to the general ledger, it is important to be aware of any carryover credits. 
    • Credits on this report have one of the following statuses:
      • Carry-Over: The credit is not set to be filed, so it cannot be applied or excluded.
      • Applied: The credit has been reported on a return, reducing the total liability due to the jurisdiction.
      • Excluded: The credit is being carried over to the next filing period, because applying it would result in negative liability for the current filing period.
    • Applied and Excluded credits are displayed on reports for the last month of the reporting period.
  2. If necessary, discuss with your client the possibility of amending the original returns.
    • Your firm or the client may amend the returns.
    • You can also contact the Compliance team about amending the original returns for you. This is particularly important when coming up against the statute of limitations for using the carryover credits.

If you need to remove a transaction from the carry-over credit report, submit a support case with the following information:

  • State or taxing jurisdiction
  • Return form
  • Document code of the carry-over credit
  • Document date for the carry-over credit
  • Amount of the credit

The Managed Returns for Accountants team removes the carry-over credit between the 1st through the 10th, when your worksheet(s) is open. Once a carry-over credit is removed from your Liability Worksheet reports, it cannot be added back. The transaction is be visible on your Transactions tab and Reconcile Reports but is no longer be labeled as a carry-over credit

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