Annual reconciliation of apportionable income (ARAI)

Once you have the information necessary to determine the receipts factor for an entire calendar year, you must file an ARAI for each tax classification to correct your reporting and obtain a refund or pay any additional tax due.

All businesses with apportionable income that are taxable in Washington and another state or country must file an ARAI. The ARAI is due by Oct. 31 of the following year. You can file your ARAI electronically through My DOR.
 
If you are unable to complete the online form, you may complete the paper form in PDF version or the Excel version.

Note: If you are unable to file your ARAI by Oct. 31, you may request an extension. Requests must be received before Oct. 31.

Method used to estimate income

When filing your excise tax returns, you can estimate Washington taxable income based on information from the most recent complete calendar year, or you may use the current year. 

It is important to indicate which method you used when you file your ARAI because this may impact how penalties are applied to periods with no business activity reported.

Example 1: A taxpayer is filing monthly excise tax returns for 2022. They have elected to estimate based on their receipts factor of 30% from 2021. This means they must report 30% of their apportionable income in each filing period. If they file no business activity returns for any period in 2022, penalties will apply to those periods. This is because the receipts factor is applied to gross apportionable income, not just income attributed to Washington.

Example 2: A taxpayer is filing quarterly excise tax returns for 2023. The taxpayer has elected to report their 2023 returns based on current tax year information. In this case, the taxpayer will only incur delinquent penalties in periods when they reported no business activity if they later determine there was apportionable income attributed to Washington in those periods.

Application of payments

Payments are first applied to interest, then penalties, then any outstanding tax due. This means you may be subject to additional penalties and interest if you submit a payment for less than the combined amount of tax, penalties, and interest on the ARAI.

Our system will not automatically calculate delinquent and underpayment penalties for reconciliations filed after the Oct. 31 due date. The department will review any reconciliations filed after the due date and assess additional penalties if applicable.

Penalties

Delinquent penalties may apply to additional tax due if the reconciliation is not filed and paid by the Oct. 31 due date. The minimum amount of delinquent penalty is $5. 

Additional penalties are as follows:

• 9% of the tax due if the ARAI is not filed and paid by Oct. 31.
• 19% of the tax due if the ARAI is not filed and paid by Nov. 30.
• 29% of the tax due if the ARAI is not filed and paid by Dec. 31.

A substantial underpayment penalty of 5% may apply if the department determines you have substantially underpaid. The minimum substantial underpayment penalty is $5. Substantially underpaid means you paid less than 80% of the total tax due and the additional tax due is at least $1,000. 

Example 3: A taxpayer files an ARAI for the calendar year 2022 on Nov. 15, 2023, and calculates additional tax due of $1,000. The taxpayer also submits a payment for the entire amount of tax due on Nov. 15, 2023. The department determines the taxpayer has not substantially underpaid and assesses a delinquent penalty of $90 (9% of the tax due).

Example 4: A taxpayer files an annual reconciliation for the calendar year 2022 on Feb. 15, 2024, and calculates additional tax due of $3,000. The taxpayer also submits a payment of $500 on Feb. 15, 2024. The department reviews the reconciliation and determines that tax has been substantially underpaid. The department assesses a delinquent penalty of $870 (29% of the tax due) and an underpayment penalty of $150 (5% of the tax due).

Additional resources

My DOR Help - Annual Reconciliation of Apportionable Income