Ohio Income Taxes and Foreign Bank Accounts

Kegler Brown Business Tax Alert

If you have been using foreign bank accounts, particularly Swiss Bank accounts, to avoid taxation, the Ohio Department of Taxation would like a word with you. The Ohio Department of Taxation, following the lead of the Internal Revenue Service, has announced a program under which taxpayers who had improperly used offshore bank accounts to hide income could voluntarily settle their tax liabilities with reduced penalties. As reported in many recent news accounts, the Internal Revenue Service and various Swiss banks have reached an agreement by which the Internal Revenue Service will receive information regarding bank deposits made by Americans in previously "secret" Swiss bank accounts. The information to be received by the Internal Revenue Service is expected to show deposits of U.S.–source income made by taxpayers who failed to report that income to the Internal Revenue Service, as well as applicable state and local taxing authorities. Ohio has an information sharing agreement with the Internal Revenue Service.

The Ohio Department of Taxation will act on information received from the Internal Revenue Service relating to offshore bank accounts held by taxpayers for the purpose of improperly hiding income. Ohio Revised Code §5747.15(A)(6) imposes a penalty of up to 100% of the tax due in situations such as this.

The Tax Commissioner will consider requests for partial penalty abatement for any taxpayer who underreported income in prior years, provided that by March 1, 2010, the taxpayer or his/her representative contacts the Ohio Department of Taxation and provides the following:

  • Cover letter stating the intention to enter into the Ohio Offshore Voluntary Disclosure Program;
  • A description of the source of funds or other assets in each account;
  • The date the initial deposit was made or the date on which the taxpayer took control or ownership of each account;
  • Documentation indicating whether the principal (which includes initial deposits and all subsequent contributions) has been taxed or untaxed in the tax years involved;
  • The amount of the potential tax liability; and
  • Whether the taxpayer participated in the Internal Revenue Service Offshore Voluntary Disclosure Program.

Taxpayers will have sixty (60) days after the initial contact with the Ohio Department of Taxation to submit all documents and payments necessary to resolve the liabilities. A special e-mail address has been established for purposes of making these disclosures, which is: [email protected].

The Ohio Department of Taxation made this announcement in an information release numbered IT2009-02. It has been posted to the Department's web site, tax.ohio.gov.

Kegler, Brown, Hill & Ritter has an active tax practice. Any questions may be directed to Daniel Ritter (614) 462-5442 or Kenneth Cookson (614) 462-5445.