Ohio State Tax Penalty Abatement & Common Penalties

ohio state tax penalty abatement

A request for penalty abatement is a written request asking the state to waive some, or all, of the penalties that have been assessed.

Ohio law permits the Department of Taxation (DOT) to abate penalties. Usually, the DOT permits it if the failure to comply with the provisions of the tax code were due to reasonable cause and not willful neglect. However, there is no published guidance as to what the State of Ohio considers “reasonable cause and not willful neglect.”

Some examples provided by the IRS are the death of a family member, incapacitation of the taxpayer, unavoidable absences, fires, floods, natural disasters, or other like situations resulting in circumstances beyond the taxpayer’s control. However, a taxpayer must pay the underlying tax due before the Department of Taxation will consider a penalty abatement request.

AG Address for Penalty Abatement Requests

A taxpayer, after paying the underlying tax, should submit a request for abatement in writing to the Attorney General’s office. Moreover, include any supporting documentation that may be relevant. The current address for submission of penalty abatement requests is:

Ohio Attorney General Collections Enforcement Division
150 E. Gay Street, 21st Floor
Columbus, Ohio 43215

The Attorney General’s office will forward the request to the Department of Taxation. Consequently, the Department of Taxation will make a determination, usually within 60 days. The Department may abate all, some or none of the penalty. Nevertheless, the taxpayer cannot appeal penalty abatement request determinations. However, they may refile the request if circumstances change.

Penalties and Interest

With respect to delinquent income tax debt, there are 2 penalties that a taxpayer should know. First, taxpayers should know the failure to file penalty. The state will assess the failure to file penalty when a taxpayer fails to file a tax return by the due date, including extensions. The failure to file penalty is the greater of $50 per month, but not exceeding $500, or 5% per month, but not exceeding 50% of the total tax that is due. This penalty will be assessed for each month, or fraction of a month, that the tax return is late.

The second is the failure to pay penalty. The failure to pay penalty is determined by the tax commissioner. Pursuant to Ohio law, it may not exceed twice the amount of the federal short-term interest rate. Currently, that rate is 4% per annum.

Additionally, interest is applied for each month that a delinquent tax goes unpaid, not to exceed the federal short-term interest rate, which as previously stated, is currently 4% per annum (Nov 2018).

As one can see, the penalty for a taxpayer failing to file their income tax return on time (the first penalty) is very steep. Therefore, even if a taxpayer is unable to pay the tax due they should strive to file their income tax return on time in order to avoid the failure to file penalty.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional.