G 2006-01 - Automated Compliance Program Penalties - Issued
June, 2006; Revised July, 2006
The purpose of this information release is to notify the
public that the Ohio Department of Taxation (ODT) has changed
some of its penalties on tax assessments imposed through its
automated compliance programs. The revision in July, 2006 was
to add the commercial activity tax assessment penalty
structure and modify the penalty imposed for certain income
tax assessments.
The Ohio Department of Taxation (ODT) is paying special
attention to taxpayers who fail to comply with filing and
payment requirements that lead to a tax assessment issued
from one of ODT’s automated compliance programs. ODT has
already accelerated the billing and assessment cycle times.
This penalty revision is initiated in order to encourage
better compliance by taxpayers and reflects the costs
associated with more intensive compliance efforts. It is an
effort to ensure fairness for all the taxpayers who are
filing and paying on time.
Effective June, 2006, the penalties imposed for an assessment
under one of ODT’s automated compliance programs have been
increased and will only be reduced if a penalty remission is
requested. In general, a request for reduction of penalty
will only be granted if unique circumstances exist; even
then, such reduction will likely only be a partial and
not a
complete abatement of the penalty.
With delinquency programs, estimated assessments are often
issued. If documentation is received to reflect a different
tax liability from that assessed, most of those assessments
will be adjusted using the corrected assessment process (for
more information on corrected assessments, see Information
Release G 2002-01 Modified Appeal Procedures – Corrected
Assessments). As applicable, the penalty will be
adjusted based on the revised tax liability – but the penalty
will likely not be reduced from the penalty structure
provided below.
While penalties assessed by ODT can be partially or fully
abated, interest charges cannot be abated. Interest is
assessed based on rates set under Ohio Revised Code 5703.47.
Interest
rates are published on the ODT Web site
(tax.ohio.gov).
Below is the penalty structure that will apply to ODT’s tax
assessments issued via one of its automated compliance
programs. Note: there is no change to
penalties applied at the first stage of billing.
Additionally, the penalties imposed as the result of an audit
(see Information
Release G 2001-02 Discretionary Penalty for
Audits), an enforcement action, or a tax
discovery effort are not subject to this revised penalty
structure.
Commercial
Activity Tax (CAT)
All CAT Assessments;
includes DQ and variance assessments
Greater
of $50 or 10% of tax
plus an additional 10% of tax due
Sales and
Use Taxes
All Sales and Sellers’ Use Tax Assessments
includes DQ and variance assessments
Greater of $50 or 10% of tax
plus 35% penalty of tax and
the additional charge imposed
Consumer Use Tax
Assessments
15% of tax
due
Income
Taxes
Income Tax DQ
Assessments
Greater of
35% of tax or
$500
Income Tax Program Assessments (NRL/Variance,
Non-DQ FAGI, CP2000,
RAR)
Two times the
interest
School District Income Tax DQ
Assessment
Greater of 35% of tax or $150
School District Income Tax Assessments
(NRL/Variance,
Non-DQ FAGI, CP2000, RAR)
Two times the interest
Corporation
Franchise Tax
Corporation Franchise Tax DQ
Assessment
Greater of 35% of tax or
$500
Corporation Franchise Tax Variance
Assessment
15% of
tax
Employer
Withholding
Employer Withholding DQ
Assessment
Greater of 35% of tax or $500
Employer Withholding Variance
Assessment
15% of tax or $500
____________________________________________________________________________
Explanation
of Terms
DQ – Late filing or non-filing of a return/report
(delinquency)
NRL – Return or report filed with no remittance of payment
Variance – Review of return/report indicates additional tax
is due
FAGI – Discrepancy in federal adjusted gross income (FAGI) on
return filed with the Internal Revenue Service compared to
return filed with Ohio Department of Taxation
CP2000 – Discrepancy resulting from additional information
received from the Internal Revenue Service
RAR – Revenue Agent Report received from the Internal Revenue
Service
Note: Internal Revenue Service provides
information to the Ohio Department of Taxation under
authorization of Section 6103(d) of the Internal Revenue
Code.
For additional information on Sales and Use, Corporation
Franchise, and Employer Withholding tax assessments, please
contact the Business Tax Assessment unit toll-free at (888)
297-7150; for Individual Income and School District Income
taxes call the Income Tax Assessment unit toll-free at (888)
297-2911; for Commercial Activity Tax information, please
contact the CAT Division at (888) 722-8829.