The Ohio Department of Taxation (ODT) has informed the OSCPA that a limited number of taxpayers received incorrect refunds or inflated credit carryforward amounts due to a system error.
Refund Error
This issue resulted from a software glitch that misclassified box one of the federal 1099-INT (interest income received) as Ohio income tax withheld. For example, a taxpayer with $3,000 in interest income may have received a $3,000 refund because ODT incorrectly treated the entire amount as tax withheld.
This error was solely due to ODT’s system, and CPAs could not have prevented it. A fix was implemented on October 10, but taxpayers who filed their Ohio individual tax return (IT1040) with a federal 1099-INT between September 1 and October 9 may have seen inflated tax payments.
Next Steps for Those Affected
ODT plans to recover these erroneous refunds by mailing notices to affected taxpayers or by reducing improperly increased credit carryforwards. They will pursue refunds only above a certain undisclosed threshold, exempting a small de minimis amount.
Taxpayers who received an erroneous refund will not incur interest on the repayment if they return the amount within 30 days of receiving an assessment, per R.C. 5747.132. ODT also indicates that some initial assessment notices erroneously requested the full refund amount instead of what was owed; corrected notices will be sent.
If you received an unexpected refund, contact your accountant before spending it.
