Voluntary Disclosure of Pass-Through Entity Tax Liabilities
In seeking to increase the level and ease of compliance with
Ohio's tax laws, the Ohio Department of Taxation offers a
Voluntary Disclosure Program. This program is designed for
pass-through entities (S corporations, partnerships or
limited liability companies treated as partnerships for
federal income tax purposes) that believe they have Ohio
income tax liabilities and wish to resolve them. By
voluntarily disclosing the liabilities, the pass-through
entity can avoid the consequences normally associated with a
nexus investigation. Any pass-through entity is eligible for
the program if it enters into a pass-through entity tax
agreement prior to any contact from the Ohio Department of
Taxation.
If you would like to establish an agreement for a
pass-through entity, you or your representative should send
us a letter explaining in detail the pass-through entity’s
activities in Ohio and how long these activities have been
performed by the pass-through entity in Ohio. It is not
necessary to identify in the letter the pass-through entity
and its members/partners/limited partners/shareholders.
However, please use an identifier to distinguish different
pass-through entities an individual may represent.
Send this letter to the following address:
Ohio Department of Taxation
Business Tax Division
Voluntary Disclosure Program
4485 Northland Ridge Blvd
Columbus, OH 43229
Upon receipt of this letter, we shall prepare a pass-through
entity tax agreement in duplicate. We shall then send to the
pass-through entity’s representative both copies of the
agreement. Within the time period specified in the agreement,
an associate/member/partner of the pass-through entity should
sign the agreements and return to the address shown above the
signed agreements, the completed pass-through entity returns
specified in the agreement, and payment of tax and interest
(see an example of our interest computation in "Other
Information", below). The division will return a signed copy
for the entity’s records.
General Terms of the Pass-Through Entity Tax Voluntary
Disclosure Agreement:
- The pass-through entity must file the pass-through entity
returns for the current taxable year plus the three preceding
taxable years and pay the tax due plus interest. Please note
the FT 1120S is required for 2009 and prior, if it is an S
Corp., and the IT 4708 and/or IT 1140 are required for all
disclosure years. C corporations that are direct or indirect
investors in the pass-through entity cannot participate in
filing an IT 4708. The pass-through entity must pay any
estimated taxes currently due for the next taxable year. Use
the estimated payment coupon IT 1140ES or IT 4708ES.
- If the department has not previously contacted the
pass-through entity, the tax commissioner will be precluded
from assessing the pass-through entity or requiring it to
file tax returns for taxable years prior to the years covered
by the agreement.
- The Tax Commissioner shall waive all penalties associated
with the years covered by the agreement.
- The Tax Commissioner may audit the income tax returns
filed by the pass-through entity for the years covered by the
agreement.
Other Information:
Ohio pass-through entity tax forms and instructions can be
searched for on our Web site here.
Interest is computed on the tax due for each period as
follows:
|
# of
days
365 or 366
|
X
|
Interest rate
|
X
|
Tax due
|
=
|
Interest due
|
Interest rates:
|
Calendar Year
|
Interest rate:
|
|
2005
|
5%
|
|
2006
|
6%
|
|
2007
|
8%
|
|
2008 Leap Year
|
8%
|
|
2009
|
5%
|
|
2010
|
4%
|
|
2011
|
4%
|
|
2012 Leap Year
|
3%
|
Example: Interest on a $500 Ohio tax due for 2007 would be
computed as follows (assume tax was due April 15, 2008 and
paid on Jan. 31, 2012):
|
2008
|
4/15/08
|
through
|
12/31/08
|
=
|
260/366
|
x
|
8% x $500
|
=
|
$
|
28.00
|
|
2009
|
1/01/09
|
through
|
12/31/09
|
=
|
365/365
|
x
|
5% x $500
|
=
|
$
|
25.00
|
|
2010
|
1/01/10
|
through
|
12/31/10
|
=
|
365/365
|
x
|
4% x $500
|
=
|
$
|
20.00
|
|
2011
|
1/01/11
|
through
|
12/31/11
|
=
|
365/365
|
x
|
4% x $500
|
=
|
$
|
20.00
|
|
2012
|
1/01/12
|
through
|
1/31/12
|
=
|
31/366
|
x
|
3% x $500
|
=
|
$
|
1.00
|
|
Total interest:
|
------------------------------------------------------>
|
|
$
|
94.00
|
|
|
|
|
|
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|