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Updates from the Ohio Department of Taxation

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The Ohio Department of Taxation (ODT) held its latest Ohio Virtual Tax Academy on August 9, 2023. The event was moderated by Organizational Development’s Theresa Slaminko, with a brief introduction from Tax Commissioner Patricia Harris.

The event was kicked off by Tax Policy Director Tim Lynch and Legislative Director Adam Schwiebert. Tim and Adam started by discussing the newly passed House Bill 33 Operating Budget (see ZHF’s final Buzz on House Bill 33) enacted July 4, 2023, and a high-level overview of changes in legislation that will affect taxpayers and tax practitioners. The first session touched on the following subjects:

  • Personal Income Tax
    • Updated Income Tax rates and brackets.
    • Home ownership savings accounts.
    • Train derailment deduction.
    • Pass Through Entity resident credit and add-back.
  • Sales and Use Tax
    • Baby product sales tax exemption.
    • Expanded sales tax holiday.
  • Other miscellaneous items such as the cigarette tax in Cuyahoga County and certain real property tax exemptions and incentives.

New Software for Individuals’ Online Filing

Tax Program Executive Jonathan Olszowy and Tax Program Executive Will Ditto led the second session. The presenters guided a virtual demonstration of the new GenTax software and some of the new systems enhancements. The new software replaces the previous Personal Income Tax and School District Income Tax software. All business taxes will continue to utilize the Ohio Business Gateway.

Key features of the new software include:

  • Taxpayer dashboard
  • File returns and amend previously filed returns
  • E-Correspondence
  • 2-way secure messaging
  • Tax preparer access
  • Digital assistant
  • Dynamic help
  • Snapshot screen share
  • Phone integration

Commercial Activity Tax (CAT)

Tax Examiner Manager Alicia Dill and Tax Examiner Specialist Jonathan Stanley were the final presenters. They provided an overview of the Commercial Activity Tax (CAT) and new updates to the CAT from House Bill 33, Ohio’s budget bill enacted on July 4th.

Key takeaways included:

  • Effective January 1, 2024, the CAT rate (.0026) will be charged as tax due only on taxable gross receipts exceeding $3 million in the calendar year.
  • Effective January 1, 2025, the CAT rate (.0026) will be charged as tax due only on taxable gross receipts exceeding $6 million in a calendar year.
  • The Annual Minimum Tax (AMT) will be eliminated effective January 1, 2024.

Interestingly, the presenters advised and encouraged taxpayers whose taxable gross receipts will not exceed the $3 million and $6 million thresholds to file a final return and cancel their account just before the exclusion amount that impacts the taxpayer goes into effect. Subsequent to the Virtual Tax Academy, ODT has issued Information Release CAT 2023-01, explaining their understanding of the exclusion and annual minimum tax changes, and reinforcing, this time in a formal release, the advice to file final returns and cancel CAT accounts for those taxpayers not expecting to exceed the new exclusion amounts. The Information Release includes instructions for cancelling the account, which can be done up to one year in advance of the chosen cancellation date. The information release, as well as a summary and FAQ about the CAT changes resulting from House Bill 33, is available on this ODT webpage. Those current quarterly taxpayers who do not cancel their accounts and also fail to file returns in 2024 can expect to receive delinquency notices from ODT. If not resolved, the delinquency notices can turn into estimated assessments. If the estimated assessments are not resolved, the assessments are certified to the Ohio Attorney General for collections. Therefore, those taxpayers expecting their taxable gross receipts not to exceed the threshold are advised to perform the steps needed to cancel. The exception is any taxpayer (or former taxpayer after the exclusion goes into effect) that prefers to file a zero return in order to run the statute of limitations on a period.

Major Change to Large Refund Claims

One final item of note: ODT touched on new changes to CAT refund claims. Taxpayers filing refund claims of $50,000 or more for CAT will be required to receive the refund through direct deposit. Sales and Use Tax, Financial Institutions Tax, Motor Fuel Tax, and Resort Tax will follow suit as well. Previously, all refunds were paid via check. The direct deposit program, “OhioPays,” which is the same system the State of Ohio uses to pay contracted vendors, is meant to be a more secure method of transferring money to the taxpayer as compared with the mailing of a check. The taxpayer will be required to register for a Payee ID, for which a space has been provided on the newly updated Application for Refund form for each of the taxes listed above. A taxpayer will be required to log in to OhioPays.gov with an OH ID to create a New Payee Registration. If a taxpayer does not have an OH ID, they will need to create an account and then use it to register with OhioPays. The Payee ID will be linked to the taxpayer’s Federal Employer Identification Number (FEIN), Taxpayer Identification Number (TIN), or Social Security Number. The primary address for the Payee ID must match the IRS W9 address. The taxpayer will link their banking information to the Payee ID for direct deposit. The Terms and Conditions in the linking agreement include the following:

You authorize the State to initiate/originate credit entries to the financial account you provide in this Supplier Portal. You also give the State authority to debit any erroneous credit or transfers to your financial account in the amount of the transfer. This authority remains in effect until revoked in writing to the Office of Shared Services, a division of the Ohio Office of Budget and Management.

This language allows ODT to credit your account, but not to debit it for taxes owed. The only debit authorized is if ODT initiates a transfer to your account in error, they may take it back, up to the amount of the transfer.

If you would like to further discuss the contents of this post, please reach out to any of our ZHF professionals.

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