Information Release

IT 2009-02 - Announcement of Ohio Offshore Voluntary Disclosure Program - Issued December 2009

The purpose of this information release is to announce the Ohio Offshore Voluntary Disclosure Program, under which certain Ohio taxpayers may resolve income tax issues with limited penalties.

The Internal Revenue Service (IRS) announced in IR-2009-75 (Aug. 19, 2009) that it is receiving from certain Swiss banks information concerning U.S. taxpayers which may or may not lead to adjustments of their prior years’ federal income tax returns. Earlier in 2009 the IRS announced a program under which taxpayers who had improperly used offshore bank accounts to hide income could voluntary settle their tax liabilities with reduced penalties. As IRS Commissioner Doug Shulman has stated, “Many of these accounts were held by U.S. people who had complied with the law and paid their taxes.” Neither the IRS nor the Ohio Department of Taxation has any interest in obtaining or using information regarding taxpayers who have complied with applicable income tax laws.

However, the agreements between the IRS and the Swiss banks is expected to show deposits of U.S.-source income made by  taxpayers who failed to report to the IRS and to state and municipal taxing authorities all of their income on which income tax was due. Ohio and federal statutes, as well as information sharing agreements, permit the sharing of tax information between the IRS and the Ohio Department of Taxation. The Ohio Department of Taxation will act on information received from the IRS relating to examination results based on offshore bank accounts held by taxpayers for the purpose of improperly hiding income. Ohio Revised Code Section 5747.15(A)(6) imposes a penalty of up to 100 percent of the tax due in situations such as this. 

The Tax Commissioner has announced that he will consider requests for partial penalty abatement for any taxpayer who underreported his/her income in prior years, provided that by March 1, 2010 the taxpayer or his/her representative contact the Ohio Department of Taxation at the below email address and provide the following:

  • A cover letter stating an intention to enter the Ohio Offshore Voluntary Disclosure Program;
  • A description of the source of funds or other assets in each account;
  • The date the initial deposit was made or the date on which the taxpayer took control or ownership of each account;
  • Documentation indicating whether the principal (which includes initial deposits and all subsequent contributions) has been taxed or untaxed and the tax years involved;
  • The amount of potential tax liability; and
  • Whether the taxpayer participated in the IRS Offshore Voluntary Disclosure Program.

Taxpayers will have sixty days after initial contact to submit all documents and payments necessary to resolve the liabilities. 

The email address to be used for purposes of making these voluntary disclosures is:

Tax_Disclosure@tax.state.oh.us

Frequently Asked Questions Regarding the Ohio Offshore Voluntary Disclosure Program

1. What is the Ohio Offshore Voluntary Disclosure Program?

The Ohio Voluntary Disclosure Program is an opportunity for taxpayers that have used undisclosed foreign accounts and/or undisclosed foreign entities to avoid or evade tax to come into compliance with Ohio’s tax laws.

2. Why should I make a voluntary disclosure?

Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it provides them with the opportunity to become compliant with Ohio’s tax laws. Simply put, it is an opportunity for these taxpayers to make arrangements to clear their tax records. In exchange for making a voluntary disclosure, taxpayers can eliminate the risk of criminal prosecution and avoid substantial civil penalties.

Taxpayers who do not submit a voluntary disclosure run the risk of detection by the Ohio Department of Taxation (ODT). The Internal Revenue Service (IRS) has recently entered into an agreement with the Swiss Confederation/government to release the names of 4,450 United States residents suspected of using foreign bank accounts held by UBS to avoid and evade taxes. Since the IRS and the department have information sharing agreements, the Ohio Department of Taxation will ultimately obtain the names of those individuals. Assessments outside of the voluntary disclosure procedure will include penalties of 50 percent of the tax.

3. How do I make a voluntary disclosure and where should it be submitted?

To make a voluntary disclosure, taxpayers should submit the information listed below. To remain anonymous when making a voluntary disclosure, taxpayers may engage a representative such as a tax preparer, accountant or attorney.

A voluntary disclosure must contain the following information:

  • A cover letter stating an intention to enter the Ohio Offshore Voluntary Disclosure Program;
  • A description of the source of funds or other assets in each account;
  • The date the initial deposit was made or the date on which the taxpayer took control or ownership of each account;
  • Documentation indicating whether the principal (which includes initial deposits and all subsequent contributions) has been taxed or untaxed and the tax years involved;
  • The amount of potential tax liability; and
  • Whether the taxpayer participated in the IRS Offshore Voluntary Disclosure Program.

Information should be emailed to: Tax_Disclosure@tax.state.oh.us

4. Will the Ohio Department of Taxation contact me if I have been accepted into the Ohio Offshore Voluntary Disclosure Program?

Yes, the department will review all voluntary disclosures and will notify either the taxpayer or the taxpayer’s representative whether the request was accepted or denied.

5. Will I be subject to criminal prosecution if I make a voluntary disclosure?

In exchange for making a voluntary disclosure, taxpayers will eliminate the risk of criminal prosecution by the Ohio Department of Taxation.   

6. Will I be subject to full civil penalties if I make a voluntary disclosure?

In exchange for making a voluntary disclosure, the department will impose a penalty of only 15 percent of the tax due.

7. Will I be subject to interest on any unpaid taxes that I owe if I make a voluntary disclosure?

Yes.

8. Can I make a voluntary disclosure if I am presently under examination by the Ohio Department of Taxation?

Yes.

9. Are entities such as corporations, partnerships, limited liability companies and trusts eligible to make voluntary disclosures?

Yes. Entities such as corporations, partnerships, limited liability companies and trusts are eligible to participate in the Ohio Offshore Voluntary Disclosure Program.

10. Do I fill out a form to participate in the Ohio Offshore Voluntary Disclosure Program?

No. Please see Question 3 for information on how to make a voluntary disclosure.

11. Am I required to pay the full amount of tax and interest I owe if I am accepted into the Ohio Offshore Voluntary Disclosure Program?

Yes.

12. Will I receive a limited look-back period if I make a voluntary disclosure?

The department will generally use the same 6-year look-back period which the IRS is using.

13. When does the Ohio Offshore Voluntary Disclosure Program end?

The program will end March 1, 2010.

14. Who should I contact if I have questions about the Ohio Offshore Voluntary Disclosure Program?

For information regarding the Ohio Offshore Voluntary Disclosure Program use the email address given in Answer #3, above, or contact Vaughn Lombardo at (614) 995-0726 or Peter Angus at (614) 387-1752.