Return based taxes are either expected or event based. Return based taxes represent taxpayers that have an expected obligation to file a Return for a filing period. Return based taxes can also be based on events such as taxpayers filing an excise tax. Income tax, withholding tax, and sales tax are examples of return based taxes.
For expected return-based tax types, the obligation is associated with a filing period as it tracks whether a filing obligation has been met for that period, and groups the assessments and financial transactions related to it. For most tax types, a filing period may be associated with a single type of obligation. For example, an active monthly Sales Tax filer has a single obligation for each month of the year. However, some tax types may require multiple filing obligations (of different types) over the same period of time. For example, a Withholding Tax type may have monthly Withholding Tax Returns as one obligation type, plus an annual Reconciliation Return and an Annual Taxpayer Withholding Detail statement as other obligation types.
Most return-based tax liability is created through the original self-assessment reported by a taxpayer on their tax return. There are two common models for self-assessment:
Full Self-Assessment. This is common in the US. In full self-assessment, a taxpayer reports their income details on their tax return, calculates their tax per the tax return instructions, and files (and pays or expects a refund) by the due date of the filing period. If the tax return has errors or is changed during processing, the taxpayer receives an adjustment notice, but never receives an assessment notice.
Partial Self-Assessment. This is common in taxes modeled after the British tax system. Like full self-assessment, the taxpayer reports their income tax details on a tax return. However, the tax return does not include instructions for calculating tax. When the tax return is processed, a Notice of Assessment is generated and sent to the taxpayer. The Notice of Assessment is a legal document informing the taxpayer of their tax obligation, and the due date for paying it.
The assessment established by the taxpayer's initial tax return is called the original assessment. If the taxpayer is later audited, and their income is increased (such that they now owe more tax), the additional tax established by the audit is part of an audit assessment. The incremental tax from the audit will be subject to different business rules, such as different rates and rules for calculating penalty and interest, and different collections notices or processes. It is also possible for a change to a tax return to result in a decrease in tax (and therefore a refund).
Copyright © 2007, 2016, Oracle and/or its affiliates. All rights reserved. Documentation build: 2.5.2016 10:21:45 [T1_1454696505000]