Differences between your client's general ledger and their scheduled returns can often be attributed to one or both of the following:
- Vendor discounts (also called timely filing discounts)
- Applied and excluded credits
One of the most common causes of differences between your client's returns and their general ledger is vendor discounts. Vendor discounts appear on the return under Remittance to Tax Authority, and may cause the amounts under both Remittance to Tax Authority and Tax Due Avalara to differ from the general ledger.
To make sure that the returns are always filed on time, we often pull funds from the client's account before the amount of any vendor discount is determined by the jurisdiction. Because of this, vendor discounts earned for timely filing are applied to the next return that we file on the client's behalf, rather than to the current return. For example, if the client earns a vendor discount in June, it is applied to the July return.
Applied and excluded credits
Any credit that would result in a negative return is excluded from the return; only the positive liability (or a zero dollar return) is filed. These applied and excluded credits, often called carryover credits, are carried forward to the next filing period. Your firm should check with the client to see if there's enough liability available to offset the amount of the credit. If there is, the credit is automatically applied against the return. If the credit can't be applied in full, once again it's excluded and carried forward. Partial credit is not applied, because liability must be equal to or greater than the credit applied. The credit continues to be carried forward until there's a period with enough liability to absorb the credit completely.
To see all transactions that were carried over in a given period, run a Liability Carryover Credits report.
If your client has an excluded credit that won't be applied for the foreseeable future, resolve the issue by amending the original return with the credit in place. See the Amend and file a return late article for specific guidelines on how to submit a request or use your firm's business practices to file the late return yourself.