By Ross Leugers
The Ohio Department of Taxation (ODT) has historically held tax payments which–for various reasons–have not been applied to taxpayers’ accounts, nor have they notified businesses of overpayments. Taxpayers that have unknowingly overpaid the Ohio Commercial Activity Tax (CAT) may now see an unexpected, but deserved tax refund.
The ODT is reversing its past policy for overpaid CAT: Governor John Kasich and ODT Commissioner Joe Testa have initiated a plan to return more than $13 million of known overpaid taxes to 3,500 Ohio businesses and will send notices of overpayments to those businesses. If you believe that your business MAY have overpaid the CAT in Ohio, or if you received a notice of overpayment, Barnes Dennig tax consultants can use their experience in identifying and obtaining refunds (including interest). For more details on the CAT overpayment refund opportunity* contact a Barnes Dennig tax consultant at (513) 241-8313.
*Note: There may be unknown tax overpayments associated with improperly sourced Ohio gross receipts and overlooked non-refundable tax credits that can offset remaining CAT paid in the past 4 years (as well as the opportunity to reduce future CAT liabilities). This refund process requires a properly documented, skillfully analyzed, and timely claim to prevail.
On May 8th, the Subcommittee on Oversight of the Committee on Ways and Means held a hearing on the International Revenue Service’s Colleges and Universities Compliance Project Final Report. Released on April 25th of this year, the report was based on an audit of 34 colleges and universities identified as at-risk for noncompliance, based on a prior survey of a larger sample size. The report focused on compliance rates in the following areas:
- unrelated business income tax (UBIT),
- executive compensation, and
- employment tax issues.
The findings revealed significant noncompliance and underreporting of unrelated business income tax (UBIT) by over 90% of the audited schools, with income adjustments of $90 million and loss disallowances of over $170 million. In addition, the IRS found many colleges and universities setting compensation in the upper bounds of what is permissible, and all of its employment tax examinations required adjustments.
According to Congressman Charles W. Boustany, Jr., Chairman of the Subcommittee, “Given the importance of nonprofit colleges and universities, it is critical that the Subcommittee continue its review of this segment of the tax-exempt sector. The IRS’s colleges and universities compliance project suggests widespread noncompliance. The Subcommittee has an obligation to explore the root of these alarming findings on the audit of our nation’s higher education providers. This hearing is an excellent opportunity to discuss the results of the compliance project and examine areas for improvement in oversight, with an eye toward comprehensive tax reform.”
With the findings of the completed report, the Subcommittee will look towards reforming the current tax laws in place. Furthermore, those non-exempt institutions affected will have to be increasingly steadfast regarding their tax and accounting practices moving forward.
By Kristen Hart
The IRS is facing budget cuts required by sequestration*. On Friday, April 19, the IRS announced it will issue furlough notices to its 90,000 employees. There are five furlough dates scheduled: May 24, June 14, July 5, July 22, and August 30, with a possibility of two additional furlough days.
This could affect taxpayers in a variety of ways, although the furloughs won’t affect those currently under review or the processing of tax returns.
However, as noted by Colleen M. Kelley, President of the National Treasury Employees Union, “On these days, phone calls to the IRS will go unanswered and Taxpayer Assistance Centers across the country will have ‘closed’ signs in their windows”.
In an effort to cushion the impact of the IRS cutbacks on taxpayers, the IRS has named new strategies that are being put in place:
- Emphasis on selecting issues for audit that will have the broadest impact on compliance, regardless of entity type or size. As a result, there will be less emphasis on the size and corporate structure of taxpayers in the designation of cases for review, and more emphasis on the nature and complexity of the issues presented.
- Improved taxpayer collaboration on setting deadlines
- Further developed case resolution in the Appeals process
- Collaboration and strategy development to address issues with flow-through entities
*Sequestration – arbitrary automatic budget cuts to reduce the federal deficit taking effect in March 2013 if Congress has not agreed on a plan to reduce the deficit by $4 trillion.
By John Michel, Director
As outlined in previous posts (I & II), House Bill 59 promised to decrease state sales tax while significantly increasing Ohio’s sales tax base, a proposal which raised serious concerns among consumers and business owners alike. Faced with resistance from many constituencies, several changes were adopted and the amended bill was passed through the Ohio House of Representatives on April 19th and is currently making its way to the Ohio Senate.
According to the amendments, the bill no longer contains the following:
1. The reductions in the state and local sales tax rates.
2. The expansion of services subject to the sales tax.
3. The business income tax deduction for proprietors and owners of pass-through entities.
The amended bill retains most other tax provisions found in the original bill, including the reduction in the state personal income tax rates. However, it will expand the nexus rules for sales tax purposes which will have an effect primarily on internet commerce involving transactions with out-of-state vendors.