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Guidance Issued for New Ohio PTE Tax

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On August 5, the Ohio Department of Taxation (“ODT”) released a Tax Alert called “Ohio’s PTE SALT Cap Workaround for ‘Electing Pass-Through Entities’ beginning in Tax Year 2022” (the “Alert”). The Alert reiterates the major points to consider and be aware of for those considering electing into the new Direct PTE Tax structure for the 2022 tax year.

The new Direct PTE Tax was discussed in this Buzz from June 20, 2022, shortly after S.B. 246 was signed into law. The Direct PTE Tax may be used as alternative to filing either a pass-through entity withholding tax return using Form IT 1140 or a composite tax return using IT 4708, and is particularly helpful where there are individual owners whose state and local taxes for the year exceed the federal SALT deduction limit of $10,000. In addition to its list of points to be aware of, the Alert notes that ODT is developing new Form IT 4738 for filing the PTE Tax. This form will also be used for electing into the Direct PTE tax; no separate form is needed to make the election.

The Alert also notes that there is currently no estimated payment coupon for Form IT 4738. Taxpayers are instructed to use the IT 1140 UPC and then, when it is time to file the IT 4738, use the new form’s Schedule I to notify ODT to transfer previously made payments from the other PTE form type to the IT 4738.

The Alert is available from ODT here.

If you would like guidance on which pass-through entity tax return might best fit your situation, or have any other questions about the new PTE Tax, please contact any ZHF professional.

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