Ohio Tax Controversies

Understanding how Ohio agencies assess and collect outstanding tax liabilities is key to resolving a state tax controversy. This article provides an overview of the Ohio tax controversy process to help you understand where you are in the process.

Ohio Tax Audit and Assessment

The primary function of the Ohio Department of Taxation is the collection and administration of state taxes, several local taxes, and the oversight of real property taxation in Ohio. Thus, if your personal state income tax return is audited, an examiner within the Department of Taxation will conduct the audit.

In the event that your return is audited, the Department of Taxation will summarize its adjustments and conclusions in a notice of proposed assessment. An assessment is the Department of Taxation’s legal billing notice of an outstanding Ohio tax liability. If you do not agree with the assessment, you may file a Petition for Reassessment with the Ohio Tax Commissioner within 60 days of receiving the notice of proposed assessment.

Practice Pointer: In Ohio, you may request a personal hearing before the the Department of Taxation in your petition for reassessment. This informal hearing is a good opportunity to present a thorough case and resolve the matter.

In response to your petition for reassessment, the Department of Taxation will issue a corrected assessment. If you again disagree, you will need to file a new petition for reassessment within 60 days from the date the Department of Taxation mailed the corrected assessment. In response to your new petition, the Department of Taxation will issue a Final Determination setting forth the basis for its decision.

Appeal to the Ohio Board of Tax Appeals

In response to the Department of Taxation’s Final Determination, you may file an appeal to the Ohio Board of Tax Appeals. You generally have 60 days from the date you received your Final Determination to file an appeal. For the Board of Tax Appeals to overturn the Final Determination, the Board must find, based on competent and probative evidence, that the Department of Taxation’s findings were clearly unreasonable or unlawful. 

When you believe that the Department of Taxation did not conduct sufficient investigation of the facts during the audit, or if there is a good faith dispute as to the law, an appeal to the Board of Tax Appeals may be a good option. Note that the Board of Tax Appeals has very specific filing requirements relating to the filing of the appeal, which should be reviewed thoroughly.

Ohio Tax Collection

Once you receive a decision from the Board of Tax Appeals, and you have exhausted your appeal rights, the tax account will be transferred—or certified—to the Ohio Attorney General for collection. Simultaneously with the certification, the Attorney General will file a judgment lien (tax lien) with the clerk of courts in the county in which you reside. Often times, taxpayers do not even realize that a tax lien was filed until after a financial institution conducts a credit check, typically when buying, selling or refinancing property.

After you pay off your Ohio tax liabilities, the tax lien is not automatically removed. You must voluntarily have the lien removed at the county clerk’s office.

Practice Pointer: When your account is certified to the Attorney General’s for collection, the overall balance of your tax liabilities will increase significantly—by as much as 20-40%—due to the accrual of interest and additional penalties and collection costs that are added to the overall balance. Therefore, while not always possible, it is always advisable to resolve your tax liability prior to certification.

Ohio Collection Alternatives

Installment Agreement

If you want to make arrangements to pay your Ohio tax liability over time, the Department of Taxation will not set up an installment agreement. The Attorney General is responsible for collecting outstanding tax liabilities owed to the Department of Taxation.

When your tax liability is certified for collection, you will receive a notice from the Attorney General indicating that your tax account is in collections. The notice could also be from one of the many special counsels that the Attorney General enlists to assist with collection. At that point, you can request an Ohio installment agreement.

An Ohio installment agreement only lasts 12 months at a time. As a result, you will need to renew the payment plan each year and interest and penalties will continue to accrue until paid in full. 

Offer in Compromise

Ohio has a formal offer in compromise program. It allows the Attorney General and Department of Taxation to settle your tax debt for less than the full amount of tax owed. Ohio Revised Code § 131.02(E)(1), and R.C. § 5703.06. The grounds for compromising an Ohio tax liability are:

1. Economic hardship;
2. Doubt as to collectibility; or
3. A substantial probability that the claim, if collected, would be subject to a refund under Ohio law.

See the Attorney General’s offer in compromise eligibility guidelines. It must be noted even if you are eligible for an offer in compromise with the IRS, you do not automatically qualify for Ohio’s offer in compromise program. The requirements are similar, but in practice, it is more difficult to settle a tax debt with the state of Ohio than the IRS. Moreover, a rejected Ohio offer in compromise does not have an appeal right. See R.C. § 5703.06(C).

Innocent Spouse Relief

If you are granted relief under I.R.C. § 6015, you are rebuttably presumed to be an innocent spouse. To request innocent spouse relief, the innocent spouse must provide the following documentation to the Attorney General’s Offer in Compromise Unit:

1. Copies of any and all correspondence between you and the IRS regarding your request for innocent spouse relief;
2. A completed offer in compromise application together with all the correspondence referenced in (1) above; and
3. Tax returns or notarized statements, and all attachments for the periods in question.

If you have not been granted innocent spouse relief by the IRS, and you want to request Ohio innocent spouse relief, you must file an offer in compromise with doubt as to liability.