December 6th, 2011 by Angela Offerman
Compliance around state reporting is complex, and many organizations struggle to understand their reporting responsibilities. Below you will an FAQ providing some clarification around some of the state reporting processes.
What is state reporting?
State reporting is the process of submitting your information returns to various state agencies much like you do to the IRS. This may be accomplished via the IRS combined federal/state program or through direct state reporting.
What is combined federal/state filing (CFS)?
This program was established to simplify the state reporting process. If you elect to use this program, the IRS will forward information returns to participating states which is many cases satisfies your state reporting obligation. A few notes about this program:
- You must sign up and be approved.
- Only certain states participate.
- Only certain form types will be forwarded.
- Some states participate in CFS but may have additional requirements.
More information about CFS can be found in IRS Publication 1220.
What is direct state reporting?
Certain states do not participate in the IRS combined federal/state program or even if they do participate they have requirements above what CFS provides. In these cases, you must create a transmittal which complies with that states requirements and submit it to them based on the published due dates to avoid penalties and non compliance.
How do I know if I have direct state reporting obligations?
This depends on which states you do business in/with. You must check with each state to determine what types of payments require reporting to that state and wether or not they quality for CFS or direct reporting.
Is there a central place where I can find state reporting requirements?
Unfortunetly the states do not follow a standard format or centralize this infomraiton. There are third party organizations which summarize and provide this information on a yearly basis.
Do states have reporting thresholds?
Yes, just like with the IRS many states only require the submission of information returns of they are above certain dollar thresholds. Each state has their own thresholds or may not have any at all. You should check the requirements for the state which you file to find out their specific thresholds.
How do I know what to file?
This is dependant on which states you have Nexus and what types of payments you are making (which forms you file). It is important to check each states requirements every year to detmine what information returns you need to file with each state.
When are direct state filings due?
Each state has their own schedule for filings. Generally states require information returns to be filed in January, February or March.
Are there penalties for filing state reporting incorrectly?
Yes. Most states have the ability to assess penalties for late or incorrect filings.
Are there changes to any state requirements this year?
Yes. Each year many states change their requirements, usually adding additional forms or adding more types of payments that need to be filed. It is important to review each states updated requirements each year to ensure compliance.
Convey is offering a free webinar on state reporting on Wednesday, December 14, 2011. Industry expert Steve Mercatante, Esq., with TIR Consulting LLC, will take you through the unique challenges associated with state reporting and withholding requirements in this live 60-minute webinar, click here to register.
Convey provides tax information reporting services and software to businesses to make IRS compliance clear and uncomplicated. U.S. federal tax advice contained in this web site is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document. (iii) The taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.