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Reconciling the small business credit

If your business and occupation (B&O) tax liability is below certain thresholds, you are entitled to the small business credit (SBC). The amount of SBC you may claim varies and is automatically calculated when you file electronically.
 
The SBC may need to be adjusted based on your annual reconciliation. Our system will not automatically adjust the SBC when you file your reconciliation. This means the estimated tax balance on the reconciliation may change. The department will review the reconciliation and adjust the SBC as necessary.

Example 1: 

Period    Tax Classification Original Tax Original SBC Original Amount Due Reconciled Tax Reconciled SBC Reconciled Amount Due Difference
Q1 2023 Service and Other Activities 1,200 - 1,200 850 110 740 (460)
Q2 2023 Service and Other Activities 100 100 - 800 160 160 640
Q3 2023 Service and Other Activities 1,700 - 1,700 850 110 740 (960)
Q4 2023 Service and Other Activities 300 300 - 800 160 640 640
    3,300 400 2,900 3,300 540 2,760 (140)


In this example, the taxpayer originally qualified for an SBC in the amount of $400. Based on their reconciliation, the taxpayer now qualifies for an SBC in the amount of $540. While the tax amounts will be accounted for in the reconciliation, the SBC adjustments will be made by the department when the reconciliation is reviewed. In this situation, the taxpayer will get a refund of $140, plus interest. 

Example 2: 

Period    Tax Classification Original Tax Original SBC Original Amount Due Reconciled Tax Reconciled SBC Reconciled Amount Due Difference
Q1 2023 Service and Other Activities 500 460 40 1,000 - 1,000 960
Q2 2023 Service and Other Activities 700 260 440 100 100 - (440)
Q3 2023 Service and Other Activities 500 460 40 1,000 - 1,000 960
Q4 2023 Service and Other Activities 500 460 40 100 100 - (40)
    2,200 1,640 560 2,200 200 2,000 1,440


In this example, the taxpayer originally qualified for an SBC in the amount of $1,640. Based on their reconciliation, the taxpayer now qualifies for an SBC in the amount of $200. While the tax amounts will be accounted for in the reconciliation, the SBC adjustments will be made by the department when the reconciliation is reviewed. In this situation, the taxpayer will get a bill of $1,440, plus interest.

References

RCW 82.04.4451 Credit against tax due – Maximum credit - Table

WAC 458-20-104 Small business tax relief based on income of business