1. Home
  2. Education
  3. Industry Guides
  4. Apportionment
  5. Reconciling The Small Business Credit

Reconciling the small business credit

If your business and occupation (B&O) tax liability is below certain thresholds, you are entitled to the small business credit (SBC). The amount of SBC you may claim varies and is automatically calculated when you file electronically.
 
The SBC may need to be adjusted based on your annual reconciliation. Our system will not automatically adjust the SBC when you file your reconciliation. This means the estimated tax balance on the reconciliation may change. The department will review the reconciliation and adjust the SBC as necessary.

Example 1: 

Period    Tax Classification Original Tax Original SBC Original Amount Due Reconciled Tax Reconciled SBC Reconciled Amount Due Difference
Period    Q1 2023 Tax Classification Service and Other Activities Original Tax 1,200 Original SBC - Original Amount Due 1,200 Reconciled Tax 850 Reconciled SBC 110 Reconciled Amount Due 740 Difference (460)
Period    Q2 2023 Tax Classification Service and Other Activities Original Tax 100 Original SBC 100 Original Amount Due - Reconciled Tax 800 Reconciled SBC 160 Reconciled Amount Due 160 Difference 640
Period    Q3 2023 Tax Classification Service and Other Activities Original Tax 1,700 Original SBC - Original Amount Due 1,700 Reconciled Tax 850 Reconciled SBC 110 Reconciled Amount Due 740 Difference (960)
Period    Q4 2023 Tax Classification Service and Other Activities Original Tax 300 Original SBC 300 Original Amount Due - Reconciled Tax 800 Reconciled SBC 160 Reconciled Amount Due 640 Difference 640
Period      Tax Classification   Original Tax 3,300 Original SBC 400 Original Amount Due 2,900 Reconciled Tax 3,300 Reconciled SBC 540 Reconciled Amount Due 2,760 Difference (140)


In this example, the taxpayer originally qualified for an SBC in the amount of $400. Based on their reconciliation, the taxpayer now qualifies for an SBC in the amount of $540. While the tax amounts will be accounted for in the reconciliation, the SBC adjustments will be made by the department when the reconciliation is reviewed. In this situation, the taxpayer will get a refund of $140, plus interest. 

Example 2: 

Period    Tax Classification Original Tax Original SBC Original Amount Due Reconciled Tax Reconciled SBC Reconciled Amount Due Difference
Period    Q1 2023 Tax Classification Service and Other Activities Original Tax 500 Original SBC 460 Original Amount Due 40 Reconciled Tax 1,000 Reconciled SBC - Reconciled Amount Due 1,000 Difference 960
Period    Q2 2023 Tax Classification Service and Other Activities Original Tax 700 Original SBC 260 Original Amount Due 440 Reconciled Tax 100 Reconciled SBC 100 Reconciled Amount Due - Difference (440)
Period    Q3 2023 Tax Classification Service and Other Activities Original Tax 500 Original SBC 460 Original Amount Due 40 Reconciled Tax 1,000 Reconciled SBC - Reconciled Amount Due 1,000 Difference 960
Period    Q4 2023 Tax Classification Service and Other Activities Original Tax 500 Original SBC 460 Original Amount Due 40 Reconciled Tax 100 Reconciled SBC 100 Reconciled Amount Due - Difference (40)
Period      Tax Classification   Original Tax 2,200 Original SBC 1,640 Original Amount Due 560 Reconciled Tax 2,200 Reconciled SBC 200 Reconciled Amount Due 2,000 Difference 1,440


In this example, the taxpayer originally qualified for an SBC in the amount of $1,640. Based on their reconciliation, the taxpayer now qualifies for an SBC in the amount of $200. While the tax amounts will be accounted for in the reconciliation, the SBC adjustments will be made by the department when the reconciliation is reviewed. In this situation, the taxpayer will get a bill of $1,440, plus interest.

References

RCW 82.04.4451 Credit against tax due – Maximum credit - Table

WAC 458-20-104 Small business tax relief based on income of business