If you are ever audited, one of the first things that the auditor will do is reconcile your sales tax accrual account to make sure that you are remitting what your own accounting records reflect should be remitted.
Regardless of which basis that you use, if there are significant differences between what was reported on your sales tax return and the sales tax accrual account, you will have some major explaining to do. That is why it is important to reconcile the account periodically.
We discuss it further in the video below.
Key Takeaways:
Reconcile the sales tax accrual account and the use tax accrual account periodically.
Document why there are differences and adjustments. Was there an adjustment because of bad debts, credit memos, etc?
Document the reasons for the adjustment(s) in real time.
Address the timely filer discounts that may be a part of the reason why there is a balance in your sales tax accrual account.
Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.