ODT sent errant refunds; seeking money back

The Ohio Department of Taxation (ODT) recently informed OSCPA that a small number of taxpayers received refunds or increases to credit carryforward amounts that should not have occurred.  

ODT’s system, due to an internal software issue, was treating box one of the federal 1099-INT (interest income received) as Ohio income tax withheld.  For example, a taxpayer who had $3,000 of interest income may have received a refund of $3,000 because ODT was treating the entire amount as being withheld for Ohio tax purposes.  However, this was clearly not tax withheld.  

Please note that this issue was entirely caused by ODT’s systems – there was nothing that a CPA could have done to prevent this issue from occurring.  ODT deployed a fix on Oct. 10, but from around Sept. 1 to Oct. 9, any taxpayer who filed an IT1040 who had a federal 1099-INT might have had an increase to tax paid on their account.  

The ODT does intend to recoup the errant refunds by mailing notices to impacted taxpayers, or reducing credit carryforwards that had been improperly increased. Also, ODT indicated they are only seeking errant refunds above an undisclosed threshold, so they are exempting a small de minimis dollar amount.  

Those taxpayers who received an errant refund will not ultimately be liable for interest on the amount due provided they repay the amount within 30 days after receiving an assessment for it.  See R.C. 5747.132.  The ODT said a small number of the initial assessment notices were mailed erroneously seeking the taxpayer’s entire refund (more than what is owed back), so taxpayers will receive a corrected assessment notice in those cases. 

In other news, ODT has released draft forms for the 2024 Ohio Individual, Pass-Through Entity, and School District Income Taxes. You can find them at tax.ohio.gov/forms by searching for “Draft forms” under Tax Type and selecting “2024” for the Tax Year.