Information Release

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  

 

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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.