We understand you may have questions related to using Anrok's reconciliation tool to reconcile transactions, returns, and balances to your general ledger. Many of these questions are common, so let's work through some of these commonly asked questions together.
Frequently asked reconciliation questions:
Why does the tax calculated not match the sales tax that I paid on the return?
There are multiple factors that could cause discrepancies between what you collected and the tax that you paid on your return for a specific period. Here are some common differences:
- Discounts: This is common in the US, where states give early filing discounts to customers who pay their sales tax returns on time.
- Penalties and Interest: If you file and pay your return late, you could owe penalties and interest, even if your return was originally $0. Both of these need to be broken out and booked in the appropriate account (not the tax payable).
- Washington B&O Tax: B&O tax is filed at the same time as your Washington sales tax return, so you will pay both at the same time, however, B&O tax is not a sales tax and does not belong in your sales tax payable account. You will need to break this amount out into a separate account specifically for gross receipts taxes.
- Credit Carryforward: Many jurisdictions do not allow you to report negative sales on a return, so if you have a refund that results in a negative amount (even at the local jurisdiction level) you will likely have to carry forward that credit to a future return where you have sales to offset the refund.
- Currency Conversion: Anrok supports multiple currencies and records transactions in the transactional currency. However, the platform will also display transactions and tax in functional currency (typically USD) at the time the transaction occurs so you can view totals in one functional currency on pages like Reconciliation. Tax paid will be typically converted from the transactional currency to the return currency at the time of filing. Because of the timing difference between these two dates, there will likely be a difference in the currency conversion rate.
- Unassociated Transactions: If you have chosen to move transactions out of a return prior to filing, your tax collected (or due) may not equal the tax you have chosen to pay on the return.
What balances should I look at?
Tax reconciliation sometimes becomes confusing because you are comparing multiple balances that correspond to different time periods.
Your beginning balance is the amount of sales tax you have calculated or collected on transactions that occurred before the current period.
Tax due is the amount of tax calculated/collected on transactions that occurred during the current period.
Tax paid is what was paid via returns and prepayments in the current period.
Because returns are not due until the month after the period is complete, the tax you collect in a period and the tax you pay in that same period will not match. The amount that should be in your ending balance depends on your filing frequency.
- Monthly: If you are filing monthly, your tax paid should match the beginning balance. Since these two should zero out, your ending balance should match the tax collected in the current period.
- Monthly with Prepayments: If you are filing monthly returns with prepayments (common in the US), your tax paid minus the prepayment paid in the current month should equal your beginning balance. The ending balance plus prepayment paid in the current month should match the tax collected in the current period.
- Quarterly or Annually: If you are filing quarterly or annually and are looking at the reconciliation during the period where the return is paid, then you would treat this the same as a monthly filing. The tax paid should match the beginning balance. Since these two should zero out, your ending balance should match the tax collected in the current period. If you are filing quarterly or annually and reconciling a period where no return was paid, the ending balance should equal the beginning balance + tax collected (tax due).
If your expected balances do not match, look at the common differences above to see why the tax you collected may not match the tax you paid. There could also be a difference from a prior period that has rolled forward.
What exports does Anrok provide to help with reconciliation?
Table level exports
- Export transactions: Exports the individual transactions that comprise the Reconciliation table to CSV
- Export returns: Exports the return summary of each return submitted in the selected period. Returns are broken out by period and jurisdiction.
- Export balances: Exports the Reconciliation table to CSV.
Jurisdiction level exports
- Export transactions in period: Exports the individual transactions that comprise the jurisdiction aggregates for the period to CSV.
- Export returns in period: Exports the return summary of each return submitted in the selected period. Returns are broken out by period for the jurisdiction.
Why do the gross sales subtotals not always sum to the total?
One transaction can sometimes belong to more than one jurisdiction and thus be included in multiple returns. For example, if you have taxable products and are remitting in both Chicago and Illinois, a Chicago transaction may be included in both your Chicago and your Illinois return. Thus, the transaction will be included in both the Chicago and Illinois subtotals, however, the grand total will only include the transaction once to avoid double counting.
Why might the tool underestimate my accrual amount for exposed jurisdictions?
For exposed jurisdictions, Anrok calculates the tax that should have been collected on each taxable sale. However, there may be penalties and interest that accrue over the period of non-compliance. There is some variability in interest rates and the extent to which penalties can be waived. Thus, Anrok surfaces the concrete tax amount that has accrued, which should be sufficient for most accrual accounting purposes.
We hope this guide helped you with some of your reconciliation questions. As always, feel free to reach out to email@example.com if you have questions or if you'd like to troubleshoot with our team.