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Tax Season Digest: What tax practitioners need to know

Written on Jan 28, 2021

By Greg Saul, Esq., CAE, OSCPA tax policy director

Ohio’s filing season opens Feb. 12: However, Ohio Tax Commissioner Jeff McClain is advising taxpayers that they do not have to wait until then. “You can file your return using tax preparation software, but it won’t be processed, and you won’t receive a confirmation that your return has been received until Feb. 12 or later.” See What’s New for Tax Year 2020 in Ohio.

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Tax conformity: The OSCPA advocacy team is working with Ohio legislators on conforming the state’s code to recent changes to the Internal Revenue Code. The big-ticket conformity item this year is the hard-fought victory that the Coronavirus Response and Relief Supplemental Appropriations Act clarified the tax treatment of Paycheck Protection Program loans, including that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven. Senate Bill 18 was introduced this week, and a House Bill is expected to arrive next week.

Municipal income tax refunds: The municipal withholding provision enacted in Sec. 29 of House Bill 197 has been a hot topic. The Regional Income Tax Agency brought some clarification as to how they intend to handle refund requests in their municipal tax update webcast on Jan. 15. “Updates have been made to the RITA Form 10A to identify and segregate these requests, and to notify taxpayers that the requests will be held in a suspended status until litigation is resolved.” The litigation referenced is a lawsuit (20CV004301) filed in the Franklin County Court of Common Pleas on July 2, 2020. Also, RITA’s segregated requests appear limited to those who started working at home “because of the state of emergency declaration” and not to taxpayers who had requested refunds in previous tax years. The Society is engaged in discussions on what do with the H.B. 197 withholding provision itself and the issue of refunds will continue to be the subject of legislative debate.

Taxability of BWC refunds:recent OSCPA article relayed that the Ohio Bureau of Workers’ Compensation will be mailing IRS Form 1099-G to businesses for the three rounds of “dividend checks” issued in 2020, most recently $5 billion in December. The BWC originally said the forms probably would not arrive to employers until mid-March, but after OSCPA expressed significant concerns about the timing, BWC now has indicated the majority will be mailed in early February. Further, the Ohio Department of Taxation is still taking the position that these BWC payments will be subject to commercial activity tax liability because they are considered taxable gross receipts since no statutory exclusion applies in R.C. 5751.01(F)(2) to the amounts received. The Society is working to get a legislative fix introduced to create a CAT exclusion.

Fraudulent unemployment benefits: The Ohio Department of Job and Family Services this month is issuing 1.7 million 1099-G tax forms because of a federal law that requires reporting of unemployment benefits. If you get one but did not apply for unemployment in 2020, you are likely the victim of identity theft. Those who think their identity was stolen and used to file a fraudulent unemployment claim should visit www.unemployment.ohio.gov, click on the “Report Identity Theft” button, and complete the reporting form. ODJFS will issue confirmation emails to everyone who files a report with information about identity theft and protection. The agency will process the reports, conduct investigations and, if necessary, issue corrections to the IRS. The Ohio Department of Taxation has also issued guidance on how to handle fraudulent 1099-Gs on your tax returns.