The cost of making a mistake on your state tax return went up July 1 when new and increased penalties took effect.

The recently enacted legislation increases the penalties imposed on businesses when they file their returns late, don’t pay all taxes due, and fail to register their businesses.

The tougher penalties are expected to generate $55 million over the next two years. However, the Department of Revenue is offering tools beuinesses need to get their taxes right the first time.

“The cost of making a mistake just went up, but we’re trying to let taxpayers know what they need to do to avoid these penalties,” Acting Director Will Rice said.

Chief among these tools is the Department’s free Electronic Filing (ELF) service, which reduces the likelihood of making a mistake by automatically calculating taxes due and flagging any potential errors before a return is submitted. It also lets businesses file returns in advance, but delay payment until the due date.

Businesses with questions about how to correctly report taxes can call (800) 647-7706 or visit www.dor.wa.gov, and click on the ELF icon. They also can request letter rulings on tax issues, or ask for a tax consultation visit.

The Department also is encouraging unregistered businesses to step forward voluntarily before they are caught and face penalties of up to 35 percent plus interest on up to seven years of back taxes. Penalties can go even higher and include criminal prosecution if intentional fraud is detected.

Rice noted that the Legislature authorized the hiring of more revenue agents to find unregistered businesses that are not paying their fair share of taxes.

“Unregistered businesses compete unfairly with honest companies. We encourage unregistered businesses to come forward voluntarily first, because it’s the right thing to do, and second, because it’s getting riskier and more costly to operate without a business license,” Rice said.

The Department’s voluntary disclosure program lets businesses settle back taxes with a look-back period of only four years and full or partial waiver of penalties, he noted. This option is only open to unregistered businesses that have not been contacted by the Department yet. More information is available at www.dor.wa.gov.

Penalties were increased by five percent for late filers, and a new five percent penalty was imposed when the Department of Revenue makes assessments following an audit or when it must bill a taxpayer for underpayment of taxes due to errors on a tax return. The penalties increase to 15 percent and then 25 percent if the taxes continue to go unpaid. As before, interest also accrues against unpaid balance. An additional five percent penalty was imposed on unregistered businesses on top of other penalties and interest. Additional information on the penalties is available at www.dor.wa.gov.