Annual Reconciliation of Apportionable Income 00:02 This video will walk you through the process of completing an annual 00:08 reconciliation of apportionable income as a business domiciled in Washington state 00:14 with throw out income on dor.wa.gov. 00:17 Click the login button. 00:20 Login to My DOR. 00:23 If you have multiple accounts assigned to your user ID, 00:26 you will need to click on the appropriate customer before you continue to the next 00:31 steps. 00:35 On the Account homepage, in the Summary tab, 00:39 you should see multiple sections listed as Balance, Return, 00:43 Reconciliation of Apportionable Income, and Account. 00:48 If you're reconciling multiple years, you'll need to file a separate 00:50 reconciliation for each tax year. 00:56 The Reconciliation of Apportionable Income section displays information and 00:59 actions available for the current reconciliation. 01:05 Actions may include file reconciliation, request an extension, 01:10 request a penalty waiver, and view or amend prior reconciliations. 01:14 This video focuses on filing a reconciliation. 01:22 For assistance with the other actions, review the My DOR Help topics available 01:24 on our website at dor.wa.gov. 01:30 If you do not see the reconciliation of Apportionable Income section or the year 01:34 you need to file, then locate the Account section and click 01:36 on More Excise Tax Options. 01:41 Here you will find the File Apportionment Reconciliation link. 01:48 We will return to our account homepage, locate the Reconciliations of 01:53 Apportionable Income section, and click on the File Reconciliation link 01:55 located at the top of the list. 02:00 This is the first page of the reconciliation. 02:05 It provides a quick overview of what to expect, what you'll need, 02:10 information on special surcharges, and where to find additional help. 02:15 Review the information, then click Next when you are ready. 02:19 On this page you'll confirm the year you are reconciling. 02:25 The year to be reconciled may be prefilled based on the selected filing 02:26 year. 02:30 If it is not prefilled, select the year. 02:34 Next you'll need to answer a couple of questions. 02:40 Are you an out of state business that established Nexus during the calendar 02:41 year being reconciled? 02:44 If your business is domiciled in Washington, 02:46 you will usually answer NO here. 02:50 If your business is domiciled in another state and you did not have Nexus in 02:53 Washington in the year prior to the year you were reconciling, 02:57 select YES and enter the date your business established Nexus in Washington. 03:02 See our My DOR guide for further assistance with this specific topic. 03:08 When filing your excise tax returns, did you use an estimated receipts factor 03:10 to calculate your taxable income? 03:16 For any apportionable classification, select Yes if you used estimated data 03:20 from the prior year to file your Washington excise tax returns for the 03:22 year you are reconciling. 03:25 Otherwise, select NO. 03:34 Once you have answered all the questions, click next to continue on this page. 03:38 You'll choose the apportionable tax classifications you need to reconcile. 03:43 You can reconcile multiple tax classifications within this annual 03:44 reconciliation. 03:49 Any tax classification listed can be reconciled. 03:54 The apportionable tax classification you reported on. 03:57 your excise tax returns are automatically added. 04:02 You'll see them listed on the Tax Classification Overview tab and as 04:05 individual tabs across the top of the page. 04:11 You'll need to fill out the required information for each tax classification. 04:16 You can do this by clicking on the tabs across the top or using the Tax 04:19 classification links in the Overview tab. 04:23 Make sure to check each one before you continue. 04:29 The apportionable tax classification you reported on your excise tax returns is 04:32 automatically selected and can't be edited. 04:38 If you need to reconcile another apportionable tax classifications not 04:42 reported on your excise tax returns, add it by clicking Add a Tax 04:46 Classification and selecting the appropriate tax classification in the 04:47 drop down list. 04:52 You cannot remove automatically added tax classifications if you don't need to 04:53 reconcile one. 04:58 Select No for the question Do you need to reconcile your receipts factor for this 04:59 tax classification? 05:04 If you need to reclassify all income from one automatically added tax 05:07 classification to another, select the checkbox, 05:11 Reclassify all income reported under this tax classification to another 05:13 apportionable tax classification. 05:16 Then choose the correct classification from the drop down menu. 05:20 If you only need to reclassify part of the income, do not 05:24 select this checkbox and reconcile each tax classification separately with the 05:26 correct information. 05:31 Complete the Describe Business Activity field by entering what your business does 05:33 within Washington for this tax classification. 05:39 Answer the question Do you need to reconcile your receipts factor or income 05:41 for this tax classification? 05:44 Mark yes, unless you are absolutely sure you have 05:49 reported your apportionable receipts factor correctly when filing your excise 05:50 tax returns. 05:54 You may wish to complete the form to see if you have changes to report. 05:59 If you have determined you reported your receipts factor correctly, 06:00 you can mark NO. 06:04 If you select NO, you will not be able to edit any further 06:07 information for this tax classification. 06:11 If you indicated you need to reconcile your receipts factor, 06:15 an additional question will display requiring you to identify how you 06:19 allocate your revenue across the various states you operate in. 06:25 Revenue must be attributed to a state or country using a specific step by step 06:26 process. 06:30 For most businesses, this is done by identifying the location 06:33 where the customer receives the benefit of their services. 06:39 This is possible because businesses can either use their existing records to find 06:44 this information or use a proportional method to estimate where the benefit is 06:44 received. 06:48 Other methods of revenue attribution are less common. 06:54 Choose the receipt attribution method that best describes how your business 06:54 allocates its revenue. 06:57 Some options may have sub options to choose from if required. 07:02 Choose the sub option that best describes how your business allocates its revenue. 07:08 For more information on this topic, see the Receipt Attribution pages of our 07:12 Apportionment Industry Guide. 07:15 Follow these steps to complete the required information for all tax 07:19 classifications you are reconciling. 07:22 You will not be able to continue until this is complete. 07:27 When finished, click next to continue. 07:31 This page is where you'll tell us if you have Throw Out income to report. 07:36 Throw out income is income from an apportionable activity that is not 07:41 taxable in any other state or country, but part of the work was performed in 07:45 Washington. 07:47 You must include throw out income in your calculations as it impacts your receipts 07:52 factor and ultimately your taxable income in Washington. 07:57 There are four options to choose from. 08:00 Yes, I have throw out income but need help 08:02 calculating it. 08:04 Yes, I have throw out income and I've 08:06 calculated it myself. 08:08 No, I don't have any throw out income. 08:11 I'm not sure if throw out income applies to me. 08:14 If you're not sure which option applies to you, choose 08:18 I'm not sure if throw out income applies to me. 08:21 This option will walk you through the process of determining whether throw out 08:25 income applies. 08:27 For this video, we're selecting Yes, I have Throw Out Income but need help 08:31 calculating it. 08:34 Click next to continue. 08:37 To help determine your throw out income, you'll first need to select the locations 08:41 you conduct business. 08:44 Check the box next to the states you do business in. 08:48 You may add countries or territories at the bottom of the page. 08:52 Type the country or territory name in the box under Country slash Territory. 08:58 You must add each country or territory individually. 09:03 Click next to continue. 09:06 On this page 09:07 you'll determine if your business meets any of the Nexus requirements to be 09:11 considered taxable in another state. 09:14 You are organized or commercially domiciled in another state or country. 09:19 You have more than $100, 000 in gross receipts sourced to another 09:24 state or country. 09:26 You have physical presence in another state or country. 09:30 You are subject to a business activities tax by another state or country. 09:35 If you met any of the above criteria in a state or country in the immediately 09:40 preceding calendar year, you have trailing Nexus. 09:46 Start by selecting the state in which your business is organized or 09:50 commercially domiciled. 09:53 Next, move down the page to enter the gross 09:55 income for each state or country in the column shown here. 10:01 Be sure to include all types of income. 10:04 That means everything from service revenue to retail and wholesale sales. 10:10 If income in any state or country is $100, 000 or greater, 10:14 Nexus is automatically established and the additional Nexus indicators are not 10:20 required. 10:23 You are required to enter income for every state or country. 10:28 If you do not have income and intentionally left at zero, 10:32 you must check this box. 10:36 Some fields, like this one, include check boxes to confirm when an 10:40 amount should be 0, while others prevent entries that exceed 10:45 values already entered. 10:48 This built in logic will help ensure your entries are accurate and consistent 10:52 throughout the reconciliation. 10:56 The following columns allow you to determine if you meet any of the other 11:00 Nexus criteria in any state or country. 11:04 Trailing Nexus should be checked 11:06 if you did not meet any Nexus requirements in the year you are 11:10 reconciling but you did in the prior year. Place a check mark by the states or 11:16 countries where you had a physical presence. 11:20 Physical presence includes having an employee working in the state or having 11:25 real or tangible property in the state. 11:29 For more information, click on the Physical Presence link. 11:33 Place a check mark by the states or countries where your income is subject to 11:38 business taxes. 11:41 This should apply if your business is required to file business tax returns 11:45 with the state or country. 11:48 The term business activities tax does not include retail sales tax, 11:52 use tax or similar transaction taxes imposed on the sale or acquisition of 11:57 goods or services, whether labeled as a gross receipts tax 12:00 or a tax imposed on the privilege of doing business. 12:05 Each individual state and country has its own laws on what income is subject to 12:10 business taxes. 12:13 Please reach out to that state or country with any business tax related questions. 12:19 Click next to continue. 12:22 This is the final step to help determine your throw out income. 12:25 For each location and tax classification, you'll see a similar page for each tax 12:31 classification you are reconciling. 12:35 The tax classification that applies to this page is displayed at the top. 12:41 First, enter gross income by state or country 12:44 for this tax classification only. 12:46 Please note you cannot enter an amount that is greater than what you entered for 12:51 that state or country on the Nexus page. 12:55 Next, you'll identify if any part of the 12:57 activity attributed to each location was performed in Washington. 13:03 Select yes or no in the applicable fields. 13:07 If your answers to the questions on the Nexus page indicate Nexus was established 13:12 for this state. 13:13 You will not need to complete this question once you are finished. 13:17 You can see your throw out income per location here and your total throw out 13:22 income for this tax classification here. 13:26 When you click next, you'll move to the next tax 13:28 classification you need to reconcile. 13:32 Once you've completed this step, for each tax classification, 13:35 you'll navigate to the Receipts Factor calculation page. 13:40 In our example, we are only reconciling this tax 13:43 classification, so we'll go directly to the Receipts 13:46 Factor calculation page. 13:49 The Receipts Factor calculation page helps determine the receipts factor for 13:53 each apportionable tax classification. 13:57 The Receipts factor is used to calculate your Washington taxable income based on 14:02 your businesses activities both inside and outside the state. 14:07 This is the formula used if you selected either yes, 14:10 I have throw out income and I've calculated it myself, or no, 14:14 I don't have any throw out income on the Throw Out income page. 14:18 Then you'll need to manually enter your Washington income, Worldwide Income, 14:23 and Throw Out Income if applicable for each of the tax classification tabs. 14:30 If you've indicated that you don't have any throw out income, 14:33 you will not be able to enter anything in this field. 14:38 The system automatically calculates the receipts factor based on your entries if 14:43 you selected Yes I have throw out income but need help calculating it or I'm not 14:48 sure if throw out income applies to me. 14:51 The system will automatically add these values based on your answers from earlier 14:55 pages. 14:57 These pre-filled amounts cannot be edited. 15:02 If anything looks incorrect, use the breadcrumb at the top of the page 15:07 or click previous to review and update your entries on the Nexus information 15:12 page and each tax classification page. 15:15 Then return to this page. 15:17 Once everything looks correct and you're confident in your figures, 15:22 click next to continue on this page. 15:25 You will be able to see your estimated tax balance for each reconciled tax 15:29 classification once the required fields on each tab are complete. 15:34 Similar to the previous tables, the Estimated Tax Balance Overview tab 15:39 provides A brief overview of what is entered on the individual tax 15:43 classification tabs. 15:46 The apportionable tax classifications reported on your excise tax returns and 15:51 any tax classifications you added to be reconciled are listed here. 15:56 Work through each tax classification by clicking its tab or its name within the 16:01 table and complete the required information. 16:05 You'll need to report your income and deductions for each tax classification by 16:10 period. 16:11 For this tax classification, enter your gross worldwide income for 16:16 each period. 16:17 Please note the total gross worldwide income must be the same amount entered on 16:22 the Receipts Factor Calculation page. 16:26 This total can be found under the table here. 16:29 If this figure is not accurate, navigate back to the Receipts Factor 16:33 Calculation page and update your entries. 16:37 Next, you can claim allowable Washington State 16:40 B&O tax deductions. 16:41 In the Deductions column, do not enter deductions for Interstate 16:46 and foreign sales. 16:48 These will be accounted for you automatically when your receipts factor 16:51 is applied to your worldwide income. 16:54 If you're not sure which deductions are allowed, 16:57 please click this link to learn more. 17:00 Once a deduction is entered, a new field will appear at the bottom of 17:03 your page asking you to describe what the deduction is for. 17:08 Enter a brief explanation here. 17:11 The worldwide income less deductions is calculated for you. 17:16 The corrected taxable income is also calculated for you. 17:21 It's calculated by multiplying the worldwide income less deductions by the 17:25 receipts factor. 17:27 As mentioned, the receipts factor helps determine the 17:30 taxable income for each tax classification. 17:34 The previously reported column shows income that was reported on your excise 17:38 tax returns for this tax classification. 17:42 The difference column shows the difference between the taxable income 17:46 previously reported and the corrected taxable income that is calculated in this 17:51 reconciliation. 17:53 The tax due on difference is calculated by multiplying the difference by the tax 17:58 rate. 17:59 This field displays the resulting tax due or credit for each period. 18:04 Below the table is a summary of the fields listed above. 18:09 The tax due on difference may result in either a debit, a credit, 18:13 or no change after totaling all periods for this tax classification. 18:18 Once you have completed the required fields for each tax classification, 18:22 review the Estimated Tax Balance Overview tab. 18:25 Before continuing, review the amounts for accuracy. 18:30 Once you are sure everything is correct, click Next. 18:34 The Small Business Credit page is where you review your Small business Credit or 18:39 SBC adjustments based on your reconciliation. 18:43 This column shows your B&O tax liability for all tax 18:47 classifications, both apportionable and non apportionable, 18:50 based on your prior reporting and this reconciliation. 18:55 Other B&O tax credits include any additional 18:58 B&O tax credits claimed on your excise tax 19:01 returns. 19:02 These will be reviewed by the Department to determine if adjustments are needed 19:07 based on the reconciled tax due. 19:10 Here is the tax due before SBC, which is your B&O 19:13 tax due after any other B&O credits have been subtracted. 19:18 The updated SBC column shows the small business credit you are eligible for 19:22 which has been adjusted following the reconciliation and the application of 19:27 other B&O tax credits. 19:30 Previous SBC shows the amount of small business credit originally claimed on 19:34 your excise tax returns. 19:37 And finally, the Difference to SBC column shows the 19:40 difference between the small business credit you originally claimed on your 19:44 excise tax returns and the amount you now qualify for 19:47 after this reconciliation. 19:50 At the bottom, you'll find the total differences across 19:53 all periods, which is your final SBC adjustment amount. 19:58 Click next to continue. 20:01 This page provides a summary of the total reconciled tax due per period, 20:05 small business credit adjustments, and estimated tax due after accounting 20:09 for small business credit adjustments. 20:13 You can find your total due here. 20:16 This may be a debit, a credit, or no change after completing this 20:20 reconciliation. 20:22 In our example, we have an amount due. 20:26 If you are filing late, you may see total estimated ARAI 20:31 delinquent return penalty assessed. 20:35 This penalty is calculated based on the total estimated tax due for this 20:40 reconciliation. 20:42 If you previously reported no business activity but now have income for that 20:46 period. 20:47 After filing this reconciliation, you may be assessed No Business Return 20:51 Delinquent Return penalty. 20:54 You will see that amount on this page if applicable. 20:58 This penalty is calculated based on the estimated tax due for that period. 21:04 If either of these penalty types are assessed, 21:06 you must answer the question Would you like to request a penalty waiver? 21:11 Select Yes or No. 21:14 Estimated interest is calculated based on the total estimated tax due for this 21:19 reconciliation. 21:21 All amounts are estimated and are subject to review by the department. 21:26 Once you have completed your review, click Next. 21:30 This page asks for the contact information of the person completing the 21:34 reconciliation in case the department needs to follow up later. 21:38 Simply enter your name and phone number. 21:41 When you're done, click next to continue. 21:44 This page allows you to add attachments to support your reconciliation. 21:49 If you have spreadsheets or other documentation that can help validate your 21:54 reconciliation, uploading them here may speed up 21:57 processing and reduce follow up requests. 22:00 If you manually entered a Throw out income amount in your receipts factor 22:04 calculation, you are encouraged to upload supporting 22:07 documentation for that entry. 22:10 Click next to continue. 22:13 If you owe a balance, you'll see the payment page. 22:17 Fill out the required information to submit your payment for any tax penalties 22:21 and interest due. 22:23 Keep in mind, if you owe a balance and don't submit a 22:26 payment, additional penalties and interest may 22:29 apply. 22:30 Click next to continue. 22:33 Please review the total amount due, payment method, and payment amount. 22:38 If this looks correct, click Submit. 22:42 If you see this confirmation page, this means you have successfully 22:46 submitted your annual reconciliation of apportionable income. 22:50 You may print your confirmation or the reconciliation from this page. 22:55 Once ready, click OK to leave this confirmation page. 23:00 This video walked you through the process of completing an annual reconciliation of 23:04 apportionable income as a business domiciled in Washington state with Throw 23:09 Out Income. 23:10 For more information, please review our Apportionment Industry 23:14 Guide and My DOR help topics.