Ohio Department of Taxation Issues Notices of Deficiency Related to FAGI Discrepancies

The Ohio Department of Taxation recently began issuing notices to Ohio taxpayers regarding discrepancies between the information reported on their Ohio individual income tax returns and that contained on their federal personal income tax returns. The Ohio Revised Code requires taxpayers to file particular information on their Ohio return consistently with what they reported on their federal return. One specific item that must match between federal income tax returns and Ohio income tax returns, is the line reflecting Federal Adjusted Gross Income, or FAGI. Accordingly, to the extent an Ohio taxpayer’s federal individual income tax return reports an amount of FAGI that does not match the amount reflected on the Ohio taxpayer’s state personal income tax return, particularly if the federal FAGI amount is larger than that reported to Ohio, that taxpayer is likely to get a Notice of Deficiency from the Ohio Department of Taxation.

A Proactive Approach is Key to Resolving an Ohio Notice of Deficiency

This is an important issue for any Ohio taxpayer, including entrepreneurs and small business owners. In the event you receive a Notice of Deficiency from the Ohio Department of Taxation, you should be proactive in addressing the issue. First, if you dispute the discrepancy or discrepancies identified in the Notice of Deficiency, you can resolve the matter by providing proper documentation to, and if necessary, negotiating with, the Ohio Department of Taxation. Alternatively, if you agree with the Notice of Deficiency, it is important to ensure that any amount due is properly and timely paid, and that the required amended Ohio income tax return is accurately and timely filed with the Department. An experienced Ohio tax attorney or Ohio tax consultant can help you effectively and efficiently dispute a Notice of Deficiency, or accurately and timely file an amended return and pay the additional tax due, ensuring that the additional payment is properly applied and credited. A proactive approach with the assistance of an Ohio tax lawyer or Ohio tax consultant can greatly: (1) increase your chances of demonstrating any errors in a Notice of Deficiency, and reducing or eliminating the amount of additional tax the Department claims is due; and (2) reduce the likelihood of the Department imposing interest and penalties on any late-paid additional tax due, as well as penalties for failure to file or late filing of a required amended return.

As always, Ohio taxpayers (including Ohio entrepreneurs and small business owners) facing Ohio tax controversies such as Ohio tax audits, Ohio tax examinations, Ohio tax notices, or Ohio tax assessments, as well as wishing to understand their Ohio tax compliance obligations and planning opportunities, it is best to consult an experienced Ohio tax attorney or Ohio tax consultant. An Ohio tax lawyer or Ohio tax consultant can fully evaluate your facts and circumstances along with applicable law and guidance to develop the most effective, efficient, and proper solution to your Ohio tax controversy, compliance, and planning needs.