1. 2017 Income Tax Seminar
Underpaid Estimated Tax; Non-resident Refund Requests and Municipal Notification
Tina Timberman, City of Athens
Art Preiksa, City of Akron
Michelle Jordan, City of Cleveland CCA

2. Estimated taxes.
(A) As used in this section:
(1) "Estimated taxes" means the amount that the taxpayer reasonably estimates to be the taxpayer's tax liability for a municipal corporation's income tax for the current taxable year.
(2) "Tax liability" means the total taxes due to a municipal corporation for the taxable year, after allowing any credit to which the taxpayer is entitled, and after applying any estimated tax payment, withholding payment, or credit from another taxable year.

3. NOTES: ESTIMATED TAXES and TAX LIABILITY are the same number
NOTES: ESTIMATED TAXES and TAX LIABILITY are the same number. Taxable income: $48,000 x 2% = $ Minus tax withheld: ($240.00) Minus prior year credit: ($102.00) TAX LIABILITY/ESTIMATED TAXES: $618.00

4. (B) (1) Except as provided in division (F) of this section, every taxpayer shall make a declaration of estimated taxes for the current taxable year, on the form prescribed by the tax administrator, if the amount payable as estimated taxes is at least two hundred dollars. For the purposes of this section: (a) Taxes withheld from qualifying wages shall be considered as paid to the municipal corporation for which the taxes were withheld in equal amounts on each payment date unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts withheld shall be considered as paid on the dates on which the amounts were actually withheld.

5. (b) An overpayment of tax applied as a credit to a
(b) An overpayment of tax applied as a credit to a subsequent taxable year is deemed to be paid on the date of the postmark stamped on the cover in which the payment is mailed or, if the payment is made by electronic funds transfer, the date the payment is submitted. As used in this division, "date of the postmark" means, in the event there is more than one date on the cover, the earliest date imprinted on the cover by the postal service.
(c) Taxes withheld by a casino operator or by a lottery sales agent under section of the Revised Code are deemed to be paid to the municipal corporation for which the taxes were withheld on the date the taxes are withheld from the taxpayer's winnings.

6. (2) Except as provided in division (F) of this section, taxpayers filing joint returns shall file joint declarations of estimated taxes. A taxpayer may amend a declaration under rules prescribed by the tax administrator. Except as provided in division (F) of this section, a taxpayer having a taxable year of less than twelve months shall make a declaration under rules prescribed by the tax administrator.
(3) The declaration of estimated taxes shall be filed on or before the date prescribed for the filing of municipal income tax returns under division (G) of section 718.05 of the Revised Code or on or before the fifteenth day of the fourth month after the taxpayer becomes subject to tax for the first time.

7. Questions?
NOTES: How would you handle a situation where a casino operator failed to pay taxes withheld on a specific individual, but the individual has proof of such withholding?

8. NOTES: Have you prescribed rules for amending a declaration
NOTES: Have you prescribed rules for amending a declaration? Have you prescribed rules for a taxpayer filing a declaration with a taxable year of less than 12 months? If you have Rules and Regulations, be sure that these items are covered. If you do not have comprehensive Rules and Regulations, you need to address these items.

9. (4) Taxpayers reporting on a fiscal year basis shall file a declaration on or before the fifteenth day of the fourth month after the beginning of each fiscal year or period.
(5) The original declaration or any subsequent amendment may be increased or decreased on or before any subsequent quarterly payment day as provided in this section.

10. (C)
(1) The required portion of the tax liability for the taxable year that shall be paid through estimated taxes made payable to the municipal corporation or tax administrator, including the application of tax refunds to estimated taxes and withholding on or before the applicable payment date, shall be as follows:
(a) On or before the fifteenth day of the fourth month after the beginning of the taxable year, twenty-two and one-half per cent of the tax liability for the taxable year;
(b) On or before the fifteenth day of the sixth month after the beginning of the taxable year, forty-five per cent of the tax liability for the taxable year;
(c) On or before the fifteenth day of the ninth month after the beginning of the taxable year, sixty-seven and one-half per cent of the tax liability for the taxable year;
(d) On or before the fifteenth day of the twelfth month of the taxable year, ninety per cent of the tax liability for the taxable year.

11. (2) When an amended declaration has been filed, the unpaid balance shown due on the amended declaration shall be paid in equal installments on or before the remaining payment dates. (3) On or before the fifteenth day of the fourth month of the year following that for which the declaration or amended declaration was filed, an annual return shall be filed and any balance which may be due shall be paid with the return in accordance with section of the Revised Code.

12. NOTES: Note that this section does not give the tax administrator the authority to determine how the balance is paid when an amended declaration is filed, EVEN THOUGH the tax administrator has the authority to prescribe rules for amended declarations. If you have Rules and Regulations, be sure that they do not conflict with this section.

13. (D)
(1) In the case of any underpayment of any portion of a tax liability, penalty and interest may be imposed pursuant to section of the Revised Code upon the amount of underpayment for the period of underpayment, unless the underpayment is due to reasonable cause as described in division (E) of this section. The amount of the underpayment shall be determined as follows:
(a) For the first payment of estimated taxes each year, twenty- two and one-half per cent of the tax liability, less the amount of taxes paid by the date prescribed for that payment;
(b) For the second payment of estimated taxes each year, forty-five per cent of the tax liability, less the amount of taxes paid by the date prescribed for that payment;
(c) For the third payment of estimated taxes each year, sixty- seven and one- half per cent of the tax liability, less the amount of taxes paid by the date prescribed for that payment;
(d) For the fourth payment of estimated taxes each year, ninety per cent of the tax liability, less the amount of taxes paid by the date prescribed for that payment.

14. NOTES:
How do you assess penalty and interest for underpayment of estimated taxes?
718.27(C)(2)(a):
 ”With respect to unpaid income tax and unpaid estimated income tax, a municipal corporation may impose a penalty equal to fifteen per cent of the amount not timely paid.”
The amount not timely paid each quarter is equal to 22.5% of the estimated tax liability. Although a cumulative amount is shown to be due each quarter, the amount not timely paid each quarter is the amount due each quarter, or 22.5%.
Penalty and Interest should be assessed on underpayment of estimated tax when the final return is received, if tax has not been properly paid. Otherwise, you could assess penalty and interest on tax that might not actually be due. Remember – this is an ESTIMATE of what is due, and is subject to change, even up to the filing of the return.

15. NOTES: (a) On or before the fifteenth day of the fourth month after the beginning of the taxable year, twenty-two and one-half per cent of the tax liability for the taxable year; (P&I assessed on 22.5%) (b) On or before the fifteenth day of the sixth month after the beginning of the taxable year, forty-five per cent of the tax liability for the taxable year; (P&I assessed on 22.5%, not 45%) (c) On or before the fifteenth day of the ninth month after the beginning of the taxable year, sixty-seven and one-half per cent of the tax liability for the taxable year; (P&I assessed on 22.5%, not 67.5%) (d) On or before the fifteenth day of the twelfth month of the taxable year, ninety per cent of the tax liability for the taxable year. (P&I assessed on 22.5%, not 90%) Total P&I assessed would be on 90% of the estimated tax liability.

17. NOTES: (C)(3): “With respect to returns other than estimated income tax returns, a municipal corporation may impose a penalty of twenty-five dollars for each failure to timely file each return, regardless of the liability shown thereon for each month, or any fraction thereof, during which the return remains unfiled regardless of the liability shown thereon. The penalty shall not exceed one hundred fifty dollars for each failure.” The late filing penalty does not apply to estimated income tax returns (quarterly payments).

18. (2) The period of the underpayment shall run from the day the estimated payment was required to be made to the date on which the payment is made. For purposes of this section, a payment of estimated taxes on or before any payment date shall be considered a payment of any previous underpayment only to the extent the payment of estimated taxes exceeds the amount of the payment presently required to be paid to avoid any penalty.

19. NOTES: When the final return is filed, is it easier to assess penalty and interest based on non-payment of the 90% by the due date, or to go back and make quarterly assessments of penalty and interest based on the periods of underpayment each quarter? For purposes of uniformity, is this an issue where all municipalities should be assessing in the same manner?

20. (E) An underpayment of any portion of tax liability determined under division (D) of this section shall be due to reasonable cause and the penalty imposed by this section shall not be added to the taxes for the taxable year if any of the following apply:
(1) The amount of estimated taxes that were paid equals at least ninety per cent of the tax liability for the current taxable year, determined by annualizing the income received during the year up to the end of the month immediately preceding the month in which the payment is due.
(2) The amount of estimated taxes that were paid equals at least one hundred per cent of the tax liability shown on the return of the taxpayer for the preceding taxable year, provided that the immediately preceding taxable year reflected a period of twelve months and the taxpayer filed a return with the municipal corporation under section  of the Revised Code for that year.
(3) The taxpayer is an individual who resides in the municipal corporation but was not domiciled there on the first day of January of the calendar year that includes the first day of the taxable year.

21. (F)
(1) A tax administrator may waive the requirement for filing a declaration of estimated taxes for any class of taxpayers after finding that the waiver is reasonable and proper in view of administrative costs and other factors.
(2) A municipal corporation may, by ordinance or rule, waive the requirement for filing a declaration of estimated taxes for all taxpayers.
Added by 130th General Assembly File No. TBD, HB 5, §1, eff. 3/23/2015, applicable to municipal taxable years beginning on or after 1/1/2016.

22. Change to Estimated Tax Fourth Quarter Due Date for Individuals
With the recent passage of HB 49, the due date for individual taxpayers ONLY for estimated tax will be 1/15. This change will be effective with the fourth quarter estimated tax payment for tax year Businesses will still be required to use the 12/15 due date for fourth quarter estimated tax. Assessment of penalty and interest is still completely discretionary by the municipal tax administrator. Remember: Estimated tax payments are not subject to the late filing penalty.

23. City of Athens Non-Resident Refund Request Form By Tina Timberman
Athens City Income Tax Administrator

24. Non-Resident Refund Request Form
First and foremost this is still a work in progress. We have used it for the 2016 tax year only. We still had issues getting used to it, but it did save us from having to change so many refund request forms.
The taxpayer is to complete the basic information listed below:
Name
Address
Social Security Number
Employer information
Work dates
Signature
Telephone number
Days in Athens section
The taxpayer is required to include the following:
W2’s
Documentation verifying the time worked outside Athens and where the work was performed
Any letters or correspondence from the employer

25. Athens Non-Resident Refund Form
The taxpayer is still responsible to attach documentation verifying the time worked outside the city limits. If they do not, the refund is considered incomplete and will not be processed.
The Certification of Employer is required to be completed, unless there is an acceptable letter from the employer on company letterhead.
We double check all the days worked inside/outside, paid holiday, vacation and sick time for accuracy, whether the taxpayer completes the information or not.

26. Athens Non-Resident Form-Income section
The bottom section is calculated by a City of Athens staff member.
By limiting the amount of information the taxpayer completes, you are also limiting the amount of possible mistakes.
After the percentage taxable to Athens is calculated, that percentage is used to finish processing the refund request.

27. Athens Non-Resident Refund Form
If the taxpayer did not complete the section labeled to be completed by the taxpayer, then we complete it when calculating the information.
Once completed and verified, we use an in-house Excel sheet to convert the number of days for each section to percentages. For example 10 vacation days equals 4% of their pay taxable to Athens.
Once all the percentages are calculated and totaled, that percentage is carried to the bottom of the form.

28. Athens Non-resident form - finishing
Once the form is completed the following takes place:
Entered into the system
Scanned
Proofed
Sent to audit
Audited and signed off by two auditors
Then submitted for processing of the refund check

29. Refunds for other municipalities
If the taxpayer applied for a refund of tax for time worked in another taxing municipality, we take the following action:
We notify the municipality that a refund has been issued for the taxpayer.
We also notify the resident city that a refund has been requested in case the taxpayer took a credit for taxes paid to our municipality. Remember, the W-2 will show a full amount of tax paid to Athens. Therefore, unless you inform the resident city, they will have no way of knowing not to allow a full credit for that tax.
If either request a copy of the refund, we will send a copy per their request.
With so many taxing municipalities and all the different rates and credits, I have created a database to help find the information in one place.
With the help of the City of Columbus, I created an Excel database that has an easy search function to locate each municipality and all of their tax information.
The database with the fax coversheet is attached to your seminar . If you have Excel or newer, I have included a slicer for quicker access to the information.

30. Akron City Non-Resident Refund Form
The City of Akron requires the taxpayer to complete the following information:
Year
Employer
Employment dates
Explanation for overpayment
Name
Address
City of residence
Social Security number
Phone number
Itinerary for days worked outside Akron
Signature
Employers verification
The following is required to be submitted with the refund request:
W-2’s
The completed itinerary sheets
The Akron Income Tax Department does all the calculations for the refund. The staff uses the provided information to calculate the amount of refund due to the taxpayer.

35. CONTACT INFORMATION
Tina Timberman, City of Athens Art Preiksa, City of Akron Michelle Jordan, City of Cleveland CCA