Pass-Through Entities

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. In addition, provide the returns for the years under the agreement with payment in full for tax and interest, along with the appropriate estimated payments required for the current year and two copies of the signed VDA agreement.

Send the signed agreements, letter, returns and payments to the following address:

Ohio Department of Taxation
Employment Tax Division
Voluntary Disclosure Program
4485 Northland Ridge Blvd
Columbus, OH 43229

Upon receipt of the letter, returns, payments and VDA agreements the division will review these documents and return a signed copy for the entity's records.

General Terms of the Pass-Through Entity Tax Voluntary Disclosure Agreement:

  • If the entity has been previously contacted by the department, the entity is ineligible for a VDA agreement.
  • The pass-through entity must file the pass-through entity returns for the current taxable year (2015) plus the three preceding taxable years (2014-2012) and pay the tax due plus interest. The IT 4708 is required for all disclosure years. The pass-through entity must pay any estimated taxes currently due for the next taxable year (2016). Use the estimated payment coupon 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 tax returns filed by the pass-through entity for the years covered by the agreement.          

Other Information:

Voluntary Disclosure Agreement

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:

2012 Leap Year 3%
2013 3%
2014 3%
2015 3%
2016 3%





Example: Interest on a $500 Ohio tax due for 2011 would be computed as follows (assume tax was due April 16, 2012 and paid on Jan. 31, 2015):

2012

4/17/12

through

12/31/12

=

259/366

x

3% x $500

= $

10.61

2013

1/01/13

through

12/31/13

=

365/365

x

3% x $500

= $

15.00

2014

1/01/14

through

12/31/14

=

365/365

x

3% x $500

= $

15.00

2015 1/01/15 through 1/31/15 = 31/365 x 3% x $500 = $ 1.27







 


 Total interest: ------------------------------------------------------> 
$ 41.88