What is an annual reconciliation form?

An annual reconciliation form is a document that is used to reconcile the amount of taxes withheld with the amount of taxes owed/paid to the state.

Who must file an annual reconciliation?

Filers who withheld state income tax from their recipient (employees and non-employees) payments during the year must file an annual reconciliation form.
Annual reconciliations may also be required as a part of the annual filing of information returns (W-2 and 1099 forms) even if there was no state withholding. This requirement varies from state to state, so understanding the individual state filing requirements where you have recipients is necessary to ensure compliance.

Why are taxpayers required to file this form?

Taxpayers are required to file an annual reconciliation form to ensure that they have paid the correct amount of withholding tax. The state uses the annual reconciliation, along with withholding statements filed periodically throughout the year, together with 1099 and W-2 records, to determine accuracy and uniformity of withholding and payments over the course of the tax year.

Filers may still be required to submit a reconciliation form even if there was no withholding. Visit our 1099-NEC State Reporting Details section for helpful instructions and links for each state or consult your tax advisor.

When are reconciliation forms due?

The due date for filing an annual reconciliation form varies from state to state. In most cases, the form is due within 30 days after the end of the calendar year – typically January 31st. While this is the norm, there are some states and certain situations in which the annual reconciliation may be due later. It is important to check with the state department of revenue to determine the specific due date for your state.

How should reconciliation forms be filed?

Most states allow taxpayers to file their annual reconciliation forms electronically. However, a few select states still require filing by paper.It is important to check with the state tax agency to determine the specific filing requirements for your state.

How do annual reconciliation forms relate to 1099 and W-2 reporting?

Annual reconciliation forms are related to 1099 and W-2 reporting in that they both provide information about the payments issued by the payer during the calendar year. While 1099 and W-2 records provide information on each individual recipient, the annual reconciliation aggregates the entirety of payment and withholding data for a single filer entity.

Annual Reconciliation forms, W-2 and 1099 returns when taken together, provide a complete picture that the state uses to determine whether the filer has accurately complied with their withholding tax and information return reporting obligations.