What to Expect When You Owe Ohio Back Taxes
In Ohio, the Department of Taxation administers and collects state taxes. However, the Attorney General enforces tax debt collections, and this office uses private collection firms called “special counsel” to contact taxpayers about their tax debts.
If you’re behind on filing or paying Ohio state taxes, we can help. The tax attorneys from the W Tax Group have extensive experience helping clients in Ohio find resolutions for their tax issues. To get help now, contact us today.
Otherwise, keep reading to learn more about taxes in Ohio, payment options, and what happens if you don’t pay or file your state taxes.
Ohio State Taxes
Individuals and businesses must pay the following taxes in Ohio. If you’re required to pay any of these taxes, you must file and pay by the deadlines noted below. This list only includes the most common taxes. There are several other business taxes including alcoholic beverage tax, commercial activity tax, horse racing tax, and others.
Individual Income Tax
Ohio assesses individual income tax at varying rates that increase based on your income. As of tax year 2022, there is no individual income tax on taxable income under $26,050. The rate is 3.99% on taxable income over $115,300. Tax rates are between these ranges on income over $26,050 and under $115,300. There is also a 3% flat rate on taxable business income.
Ohio state tax returns are due the same day as federal income tax returns. They’re due on April 15th of the year following the tax year. You can apply for an extension until October 15, but your tax payment is still due in April. If the due date falls on a weekend or holiday, it moves to the next business day.
Sales and Use Tax
Sales and use tax is due monthly, quarterly, or semi-annually. Monthly payments are due on the 23rd of the month following the month of sales. Quarterly sales tax payments are due April, July, October, and January 23rd of the month following the previous quarter of sales. Semi-annual sales tax payments are due July and January 23rd for sales during the prior six months.
Your reporting period varies based on the value of sales your business generates. You must register for a sales tax license, and then, the Department of Taxation will let you know when your sales tax returns are due.
All businesses that employ people in Ohio must withhold state taxes from their employees’ paychecks based on the employees’ filing statuses and their number of dependents. The payments for withholding tax are due on the 15th of every month following the month the payments were made.
Withholding tax returns are due quarterly on the last day of April, July, October, and January for the previous quarter. If the due dates fall on a weekend or holiday, the returns or payments are due the next day.
How to Pay Ohio State Taxes
You can pay individual income tax in the following ways:
- Mail a check — Submit it with your paper return.
- Pay online — You can set up an online account or pay as a guest. Echecks are free, and credit card payments require a 2.5% fee.
- Pay over the phone — Call ACI Payments at 1 (800) 272-9829. To make a payment, you need your Social Security Number, the tax year, your credit card number, and the Ohio jurisdiction code 6446.
You can pay Ohio business taxes including sales and withholding tax as follows:
- By phone — Call ACI Payments at 1 (800) 2PAY TAX (272-9829). Enter the Ohio Business Tax Jurisdiction Code 6447 and follow the prompts to pay by credit or debit card.
- ACI Payments Website — You can pay business taxes online at ACI Payments, Inc. You need the form number for the business tax due, the amount due, your account/vendor license number, and a credit card.
- Ohio Business Gateway — You can pay business tax online through the Ohio Business Gateway. You can also file sales & use and withholding tax forms on this site.
- Ohio Treasurer of State — You can pay sales and use, withholding, pass-through-entity income tax, and several other types of business taxes on the Treasurer of State website. You must pay by electronic funds transfer (EFT) which is an ACH credit.
How to Pay Estimated Taxes in Ohio
In Ohio, you must make estimated payments if your total tax liability is more than $500 per year. This generally only applies to people who are self-employed or small business owners. If you work for an employer, you simply need to make sure that they withhold enough from your check to cover your full tax liability.
Estimated payments are due quarterly on April 15, June 15, September 15, and January 15. If any of these due dates fall on a weekend or holiday, the payment is due the next business day. You can pay online at the Department of Taxation website, or you can mail a check or money order to the Department along with Form Ohio IT 1040ES.
How to Resolve Ohio Back Taxes
If you can’t afford to pay your state back taxes in full, Ohio offers several resolution options. You can consider the following options. Or contact us directly to talk about the best options for your situation.
12-Month Payment Plan
The state is typically willing to accept a monthly payment plan if you can pay off your back taxes within 12 months. There is no Ohio payment plan application. Instead, you need to work directly with the Attorney General’s office or the private collection agency assigned to your account.
Generally, you can’t set up a payment plan until your tax debt has been certified. This typically happens about two months after you file. To reduce your balance in the meantime, you can make payments online.
Ohio Offer in Compromise
The State of Ohio is willing to let some taxpayers settle their tax debt for less than they owe. This is called an offer in compromise. To qualify, your tax debt must have been certified by the Attorney General at least a year ago. You must owe at least $500, and you can’t be in bankruptcy.
You also must be current with filing all of your tax returns and making estimated payments. To apply, contact the Ohio Offer in Compromise unit at (614) 779-0105 to request an application, or contact an Ohio tax attorney to help you.
You can qualify for an Offer in Compromise in three ways:
- Economic hardship — This applies when you don’t have income or assets to pay the tax debt, and forcing you to pay it in full would create economic hardship.
- Doubt as to liability — When there is a legitimate doubt that you really owe the tax.
- Substantial probability that the collected tax would be refunded — This happens very rarely, and a tax attorney can outline what to expect if you believe this applies to your situation.
When you apply for an offer in compromise, you will have to provide the state with very detailed information about your income, expenses, assets, and debts. If the state finds out that you withheld information in your application, they will demand full payment of the tax liability. If the state accepts your offer, you must stay compliant with all tax filings for the next five years, or the state can rescind your offer.
Applying for an offer in compromise is a long and detailed process. It also requires a lot of patience because the Attorney General’s office generally takes three to six months to review your application.
Ohio Innocent Spouse Relief
If you obtain IRS innocent spouse relief, the State of Ohio will also extend you innocent spouse relief. You need to submit a copy of your IRS application for relief as well as any correspondence you have received from the IRS. You also need to fill out an Ohio Offer in Compromise application.
You can apply for innocent spouse relief in Ohio before you get approved by the IRS, but to do so, you must apply for an Offer in Compromise based on economic hardship. Then, instead of explaining that you don’t have the assets or income to pay the tax bill, you should argue that your spouse or ex-spouse incurred the tax debt without your knowledge and that it would be unfair to force you to pay.
How to Appeal an Ohio Tax Assessment
If you don’t agree with an Ohio tax assessment, you have the right to appeal to the Department of Taxation Appeals Office. When you appeal, the state will provide you with an informal hearing. If you don’t agree with the results, you can appeal to the Board of Tax Appeals.
The informal hearing is usually over the phone, but the Board of Tax Appeals hearing is a more formal in-person process. You can represent yourself, but for the best results, you may want to work with a tax attorney who has a deep understanding of the tax law.
If you disagree with the ruling from the Board of Appeals, you can appeal again to the Ohio Appellate Courts. At this point, a tax attorney is critical because this is the last chance to make your case.
Help From the Department of Taxation Problem Resolution Office
In Ohio, private debt collectors collect tax debts. These people don’t work for the state, but they have the full authority to act on behalf of the Attorney General. If you have problems with a private tax collector or an employee of the Attorney General, you can submit a complaint to the Department of Taxation Problem Resolution Office.
You can reach out to the Problem Resolution Unit if you think that a collector isn’t respecting your rights, you haven’t received adequate service, or you’ve been waiting more than 45 days for a response from the Department of Taxation. Use the OH Problem Resolution Unit form to make contact.
What Happens If You Don’t Pay Taxes in Ohio?
If you don’t pay back taxes in Ohio, the state can take several collection actions against you. Here is an overview of what happens if you don’t pay state taxes.
Penalties and Interest
The Ohio Department of Taxation applies interest to unpaid taxes. The rate adjusts every year, and it’s the federal short-term rate from July plus 3 points. As of 2023, the interest rate is 5%. If you have overdue personal property or estate taxes, the rate is the federal short-term rate rounded to the nearest percentage points. This rate is just 2% for 2023.
If you pay late, the state can charge a late payment penalty that is double the interest rate. The fee for filing late is 5% of the tax due or $50 per month — the larger penalty applies. This penalty can get up to $500 or 50% of the tax due. The late filing fee applies even if you are due a refund from your Ohio state tax refund.
Refund Offset for Ohio Back Taxes
The Secretary of State can seize your Ohio and IRS tax refunds if you have unpaid taxes. You may receive a notice before this happens, but the state is not required to notify you about refund offsets. If the Secretary of State seizes your state and federal refunds and they exceed your tax due, you will receive a check for the difference in the mail.
The Ohio Attorney General can issue tax liens against you if you fail to pay your taxes. A tax lien is a public notice of your tax debt. It gets filed in the county where you live, and it attaches to all of your assets.
If you sell your home, for example, the tax lien requires some of the proceeds from the sale to be used to satisfy the lien. If you try to take out a loan against an asset, the lender will see that there is a lien against the asset, and they may deny the loan.
Ohio tax liens stay active for 15 years, and the state can renew them. Ultimately, Ohio state tax liens can stay in place for 40 years. That makes it very hard to avoid paying your tax debt in Ohio.
Wage Garnishments for Unpaid Taxes
Normally, if a creditor wants to garnish your wages in Ohio, they have to get a judgment against you. However, this is not the case for unpaid taxes. The state can garnish your wages for unpaid taxes without taking you to court to get a judgment against you.
The state simply needs to notify you, and if you don’t respond to the notice, the Attorney General or the collection agency handling your case can send a letter to your employer instructing them to garnish your wages.
In addition to the above actions, the State of Ohio may also seize your assets, levy your bank accounts, or take other collection actions. If you’re dealing with or worried about collection actions on your account, contact us today.
Notices About Ohio Back Taxes
The state sends a wide range of notices to taxpayers who are behind on filing or paying their taxes. The notices state what happens if you don’t pay your taxes, and they often outline resolution options.
One of the most common notices is the Ohio Individual Income Tax Failure to File Notice (IRDQ0009). The Ohio Department of Taxation sends this notice to taxpayers who filed a federal return with an Ohio address but didn’t file an Ohio return.
If you’re not required to file because you’re a military non-resident or you only use an Ohio address for mail, send the state Form IT 10 Ohio Income Tax Information Notice. If you’re not a resident, you should send the state copies of your W2s proving that you didn’t work in Ohio. If you were supposed to file, file Form IT 1040 as soon as possible. If you already filed, reach out to check if the department has your return.
Statute of Limitations on Ohio taxes
In Ohio, the state has seven years from the date of the tax assessment to collect the taxes you owe. The Attorney General can start legal collection proceedings against you as long as it’s within the seven-year time frame. If the state doesn’t take action by the time that the statute of limitations expires, it loses the chance.
However, as long as a tax lien has been filed by the statute of limitations, it can be renewed. Tax liens last for 15 years in Ohio, and if you don’t pay your state taxes, the lien can stay active for up to 40 years.
Ohio Voluntary Disclosure Program
Ohio’s Voluntary Disclosure Program allows you to get caught up on state taxes without facing a lot of consequences or penalties. The Department of Taxation doesn’t detail the benefits of the Voluntary Disclosure Program on its website. It simply notes that you will receive more favorable terms if you qualify. In most states, you don’t incur penalties when you file delinquent returns through a Voluntary Disclosure Program.
At the time of writing, you must meet the following requirements to qualify:
- Not be in contact with the state about any tax liabilities prior to tax year 2018.
- Not contacted by the department for tax liabilities from tax years 2018 to 2021.
- Not have any unpaid bills or assessments for Ohio individual income taxes.
- Not under investigation from the Criminal Investigations Division of the Department.
- Haven’t already filed taxes for years 2018 to 2021.
As these qualifications are very time-bound, they are subject to change. As a general rule of thumb, the Voluntary Disclosure Program typically refers to the last five tax years. So, if you’re reading this in 2024, you may qualify if you are not in contact with the department for any taxes due between 2020 and 2023. However, you should contact an Ohio tax professional to learn about the exact rules and how they apply to your situation.
Tax Audits in Ohio
The Department of Taxation has the right to audit your return. If your individual or business return is selected for an audit, you must provide books, records, or other details to back up the information on your state tax returns,
During a tax audit, you have the following rights:
- To be told when the audit starts and ends.
- To receive reasonable notice about the audit.
- To be represented by a tax professional such as an attorney, a CPA, or an enrolled agent.
- To refuse to answer questions until you have representation.
- To record the audit.
- To pursue legal remedies if the Tax Examiner doesn’t respect your rights or the law.
If you disagree with the results of the audit, you can appeal to the Board of Tax Appeals, but there are strict processes and deadlines for the appeals process. For best results, you should work with a tax professional who has experience with Ohio tax laws and the audit process in this state.
Get Help With Ohio Tax Issues
Are you dealing with unfiled tax returns? Unpaid Ohio taxes? An incorrect assessment or an audit? Then, you should get help today. At the W Tax Group, we have the experience you need to navigate the system and get the best resolution possible.