Ensuring Compliance with Filed Sales Tax Returns with Jessica Croft

Why Sales Tax Reconciliation is Essential for Business Compliance

Sales tax is a complex but unavoidable part of doing business. Whether selling products or services, businesses that collect sales tax must report and remit the correct amount to state and local tax agencies. Errors in sales tax reporting can lead to underpayment, overpayment, IRS penalties, and compliance issues that can negatively impact cash flow.

Sales tax reconciliation ensures that the amount of sales tax collected matches the sales tax reported on tax filings and that any discrepancies are corrected before filing.

Jessica Croft of Bookkeeping by Prismatic Jess specializes in sales tax reconciliation services, helping businesses ensure sales tax compliance, prevent financial discrepancies, and maintain clean financial records.

This guide will cover the importance of sales tax reconciliation, common errors businesses make, and how Jessica helps businesses stay compliant.

What is Sales Tax Reconciliation?

• Sales tax reconciliation is the process of matching the sales tax collected from customers with the amount reported and filed with state and local tax authorities. It ensures that:
• Sales tax collected matches reported tax filings.
• There are no discrepancies between tax liability accounts and filed returns.
• Tax exemptions and deductions are recorded correctly.
• Any errors in prior filings are identified and corrected before submission.
• Businesses that fail to reconcile sales tax properly may overpay or underpay taxes, leading to financial losses or legal penalties.

Why Sales Tax Reconciliation is Crucial for Businesses

1.⁠ ⁠Prevents Overpayment or Underpayment of Sales Tax

Without reconciliation, businesses may pay more or less than they actually owe, affecting cash flow and tax compliance.

2.⁠ ⁠Ensures Sales Tax Compliance with State and Local Regulations

Different states and localities have varying sales tax rates, filing requirements, and deadlines. Reconciling sales tax ensures businesses file accurate returns and meet state tax obligations.

3.⁠ ⁠Reduces Risk of IRS Audits and Penalties

• Tax authorities regularly audit businesses for sales tax compliance. A well-reconciled sales tax record helps businesses:
• Avoid tax penalties.
• Provide accurate records in case of an audit.
• Reduce the risk of back taxes or fines.

4.⁠ ⁠Detects Errors Before Filing Sales Tax Returns

Reconciliation ensures that sales tax amounts reported in QuickBooks Online or other accounting software match actual sales tax returns, allowing businesses to correct mistakes before filing.

5.⁠ ⁠Improves Financial Reporting Accuracy

• Accurate sales tax reconciliation helps businesses:
• Track sales tax liabilities correctly.
• Maintain clean financial records.
• Understand their true revenue and cash flow.

6.⁠ ⁠Helps Avoid Cash Flow Disruptions

Incorrectly recorded sales tax amounts can cause unexpected tax liabilities, leading to cash shortages when payments are due.

Common Sales Tax Reconciliation Errors

Many businesses make critical mistakes when handling sales tax, leading to financial discrepancies and compliance issues.

1.⁠ ⁠Reporting the Wrong Sales Tax Rate

• Businesses with multiple locations may apply the wrong state or local tax rate.
• Online sellers may incorrectly charge tax based on their business location instead of the buyer’s location (destination-based vs. origin-based tax rules).

2.⁠ ⁠Not Separating Sales Tax Collected from Business Revenue

Sales tax collected from customers should be recorded as a liability, not revenue. Failing to separate these amounts can lead to overstated income and tax reporting issues.

3.⁠ ⁠Misclassifying Tax-Exempt Sales

• Nonprofit organizations, government agencies, and resellers may qualify for sales tax exemptions, but businesses must properly document and report these exemptions.
• Incorrectly exempting taxable sales can lead to underpayment of sales tax.

4.⁠ ⁠Failing to Reconcile Sales Tax Before Filing Returns

• Many businesses file sales tax returns without verifying:
• That sales tax collected matches the tax reported.
• That refunds or adjustments were accounted for correctly.

5.⁠ ⁠Not Updating Sales Tax Settings in Accounting Software

• Businesses that change locations, sell in new states, or modify their tax collection process must update their sales tax settings in QuickBooks Online, Xero, or their POS system.
• Jessica helps businesses identify and correct these errors before they create tax problems.

How Jessica Croft Conducts Sales Tax Reconciliation

1.⁠ ⁠Gathering Sales Tax Reports and Financial Statements

Jessica starts by reviewing sales tax reports from accounting software, e-commerce platforms, and POS systems to identify discrepancies.

She ensures that:

• Sales tax collected matches sales tax recorded in the general ledger.
• All taxable sales, exempt sales, and refunds are accurately reported.

2.⁠ ⁠Matching Sales Tax Collected to Filed Tax Returns

Jessica compares:

• Total sales tax collected from customer transactions.
• Sales tax liabilities recorded in QuickBooks or accounting software.
• Sales tax amounts reported in state tax filings.

3.⁠ ⁠Identifying and Correcting Sales Tax Discrepancies

Jessica investigates and corrects:

• Incorrect tax rates applied to sales.
• Transactions incorrectly marked as taxable or tax-exempt.
• Refunds and credits that were not accounted for properly.

4.⁠ ⁠Adjusting General Ledger Accounts

Jessica ensures that sales tax liability accounts match the sales tax reported and paid, making necessary adjustments to keep financial records accurate.

5.⁠ ⁠Providing Sales Tax Reconciliation Reports

Jessica delivers a detailed report showing:

• Total taxable and non-taxable sales.
• Sales tax collected vs. sales tax paid.
• Any adjustments made to correct discrepancies.

Benefits of Professional Sales Tax Reconciliation Services

1.⁠ ⁠Avoid Costly Tax Mistakes

Jessica ensures businesses file accurate sales tax returns, preventing overpayments, underpayments, and penalties.

2.⁠ ⁠Saves Time and Reduces Stress for Business Owners

Manually tracking sales tax can be overwhelming. Jessica takes care of sales tax reconciliation so business owners can focus on running their business.

3.⁠ ⁠Keeps Businesses IRS and State Compliant

Jessica ensures that all sales tax records align with IRS and state requirements, reducing the risk of audits and fines.

4.⁠ ⁠Improves Cash Flow Management

With accurate sales tax records, businesses can better plan for tax payments and avoid unexpected tax liabilities.

5.⁠ ⁠Ensures Business Growth is Tax-Ready

As businesses expand into new markets, Jessica helps them stay compliant with new tax regulations and multi-state sales tax requirements.

Why Choose Jessica Croft for Sales Tax Reconciliation?

1.⁠ ⁠Expert in Sales Tax Compliance and Bookkeeping

Jessica has extensive experience helping businesses accurately track, report, and reconcile sales tax in QuickBooks and other accounting software.

2.⁠ ⁠Works exclusively with Quick Books Online

Whether a business uses QuickBooks Online, Shopify, Square, or other platforms, Jessica ensures sales tax is correctly reconciled.

3.⁠ ⁠Detail-Oriented and Reliable

Jessica’s expertise ensures that every transaction is reviewed carefully to prevent sales tax errors.

4.⁠ ⁠Ongoing Sales Tax Support

Beyond reconciliation, Jessica provides monthly bookkeeping services to help businesses manage their tax obligations year-round.

Ensure Sales Tax Compliance with Expert Reconciliation Services

Sales tax reconciliation is essential for ensuring accurate tax filings, preventing IRS penalties, and maintaining organized financial records.

Schedule a Sales Tax Reconciliation Consultation with Jessica Croft

Businesses looking for expert sales tax reconciliation services should contact Jessica Croft of Bookkeeping by Prismatic Jess. With her expertise, businesses can stay compliant, avoid tax errors, and streamline their sales tax reporting process.