Ohio State Tax Payment Plan Options

ohio state tax payment plan

In Ohio, if you are unable to pay off state tax liabilities in full, you can pursue a payment plan. It is also known as an installment agreement (IA).  IAs allow a taxpayer to pay off tax debt over a series of monthly payments. When filing your tax return, it is always a good idea to make a partial payment using Ohio form IT 40P.

Attorney General & Private Collection Firms Set Up Payment Plans

Ohio law does not authorize the Department of Taxation to set up a payment plan. The Attorney’s General’s office (AG) is responsible for the collection of Ohio’s delinquent taxes. Therefore, the AG’s office has the sole power to set up payment arrangements with taxpayers. Thus, a taxpayer must wait until the Department of Taxation “certifies” the debt to the AG’s office for collection.

When You Can Setup a Payment Plan

Tax debt will become “certified” after the original assessment from the Department of Taxation expires – which is generally 60 days. The taxpayer may still make a full or partial payment on the tax debt. However, interest and penalties will accrue if the taxpayer fails to pay the balance in full. Often, making a partial payment is still beneficial for the taxpayer. It is essential especially for those with huge debts, as the amount of penalty and interest that a taxpayer will owe is based upon the amount of tax debt owed.

Once the tax debt has been “certified” to the AG’s office for collection, they will issue their notice to the taxpayer. Practically speaking, the taxpayer has a short time to deal with the actual Attorney General’s office. The AG usually assigns cases quickly to one of their private collection firms. These private collection firms, called “special counsel,” are granted all power and immunity that the state of Ohio reserves for the collection of government debt. Therefore, they are not subject to the Federal Fair Debt Collection Practices Act (FDCPA). It is critical that taxpayers promptly work to resolve their delinquent tax debt at this stage. If a taxpayer does not, they risk enforced collection by these private firms. Further, these firms will assess additional collection fees on top of the already accruing penalties and interest.

Usually, 1 Year Payment Plans Are Available

The Attorney General’s office will accept your request for installment payments for payment plans of up to one year. It means the taxpayer must agree to a monthly payment amount that pays off the entire delinquent tax debt, plus penalties, interest and collection fees, within 12 monthly payments. Naturally, based on this formula, the monthly payment figure for those taxpayers who have significant delinquent tax debt is, in most situations, too high for the average taxpayer to afford.

What If You Can’t Pay Off Your Tax Balance In 1 Year?

If the taxpayer is unable to afford to pay off the debt in 12 monthly payments,  you can look to qualify for other forms of tax relief. If you do not qualify for other options, the AG may accept a lesser monthly payment figure if the taxpayer can establish a financial hardship. A taxpayer establishes a financial hardship by providing financial information. The financial information should show the taxpayer is unable to pay the standard 12-month payment amount. Each special counsel will determine a financial hardship differently. However, generally, they seek the same or similar financial information discussed in an Offer in Compromise Application.

How to Apply for a Payment Plan

In Ohio, and unlike with the IRS, there is not a specific form for an Installment Agreement or payment plan. Consequently, you or your representative must negotiate with the AG or the private collection firm that has your file. Once you reach an agreement, the collection firm will draw up an installment agreement for you.  Taxpayers, or their representatives, should be mindful to include a hold or stay on enforced collections as part of the written payment agreement to protect the taxpayer from later being subject to enforced collection.

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 admitted or authorized to practice in your jurisdiction.