Hot SALT Tips of the First Quarter 2017

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Written by Karen Poist, CPA and Kim Tarnakow, CPA

Be prepared to share (with the ADOR)!

The Alabama Department of Revenue is taking several steps in the fight against identity theft and tax fraud in Alabama.  To e-file an individual tax return, taxpayers are required to provide information from their driver’s license, including the license number, issue date and expiration date.  The ADOR is also randomly confirming taxpayer identification by using a quiz.  Once your return has been accepted by the ADOR, you may be contacted to complete The ID Confirmation QuizThe ID Confirmation Quiz is completed online and once your identity has been confirmed, the ADOR will process your return.  See https://revenue.alabama.gov/idtheft/ for additional information on the Alabama Taxpayer Identity Protection Program.

Income Tax

The ADOR has a website available for taxpayers called “My Alabama Taxes” (MAT), an internet portal which provides taxpayers with secure online services and immediate access to their Alabama tax information.  Features currently available to taxpayers include: View/print copies of most recently filed returns; make tax payments; request a name or address change; view any notices; see balances of all ADOR tax accounts; and, view tax payment summaries for all periods.   In addition, a taxpayer can select an option to be notified by the ADOR when an Alabama tax return has been filed using his/her Social Security number.   MAT can be accessed at https://myalabamataxes.alabama.gov/.  This is a great tool to manage your Alabama taxes.

Use Tax

For businesses and individuals, use tax is imposed on tangible personal property brought into Alabama for storage, use or consumption when sales tax is not paid at the time of purchase.  For businesses, the state and local jurisdictions have implemented an aggressive audit approach to capture unreported use tax.  Use tax can be remitted on the MAT website.  For individuals, use tax may be owed on purchases made online if sales tax is not collected by the seller.  Use tax for individual taxpayers is reported and remitted with the Alabama Individual Income Tax Return, Form 40.  Now is the time to gather your 2016 online purchase information to provide to your tax preparer.

Ad Valorem Tax

Each state has different rules and dates for determining if property is subject to Ad Valorem (personal property) tax.  For example, in Alabama, property owned on October 1st is generally subject to tax.  In Georgia, the date is January 1st.  Inventory is subject to Personal Property Tax in the state of Mississippi.  Please consult the rules for each state in which you are conducting business.  Missing a state ad valorem filing and/or deadline can be costly!

Contractor Licenses

If you are conducting business in multiple states, a contractor license may be required in each state.  Some states have reciprocity or lesser filing requirements.  If you already have a contractor license in your primary state but are expanding to do business in additional states, check the contractor license requirements before beginning the bid process.  This will provide the opportunity for bids to be structured in such a way as to take advantage of favorable exceptions.

License requirements can be determined for each state by visiting http://www.contractors-license.org/ .  Click on any state on the map to get information about licensing.  Holding a license in one state does not grant the right to do construction work in another state.  Exceptions are noted in the list of license requirements by state.

Business Licenses

Remember that Alabama municipal business licenses are due either January 31st or February 15th.  Each municipality is required to send a reminder notice by December 31st to each taxpayer who purchased a business license that year. Review where you have conducted business in the last year and where you are projecting to conduct business during 2017.  Obtain all necessary business licenses to be in compliance with local ordinances.

Unclaimed Property

Begin the new year by adopting policies and procedures that will minimize unclaimed property exposure.

  • Resolve all outstanding checks within 90 days of issuance.
  • Follow up on outstanding customer credits. If credits are not utilized within a reasonable amount of time, refund the credit amount.
  • Review accounts receivable for negative balances. Determine the reason for the negative balance and resolve within a set amount of time.

See https://alabama.findyourunclaimedproperty.com/docs/Reporting%20Instructions%20-2015-final.pdf for Alabama’s Unclaimed Property rules.

Unclaimed property could have a financial statement impact.  Any potential liability should be addressed annually.  If it is discovered that exposure exists for unreported unclaimed property, the liability should be evaluated and reported in accordance with accounting standards for recognizing contingencies.

For more information on any of the SALT Tips or other state and local tax needs, please contact the BMSS SALT Services Group.

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