Compliance Letter

[cpenn6905]

I received a letter from the State of Ohio that because the Business Income amount on the state return does not match the schedule C business income amount I owe additional tax plus interest for '17 and '18...The state return uses the income from the federal return because I do not input income twice...I have used Turbo Tax for many years and this is my first issue.

Why is the amount different in your tax program?

[Hal_Al]

Ohio allows a Small Business deduction (SBD). It is shown on line 11 of Ohio Schedule A ("Business income deduction").

TurboTax (TT) does not automatically use the net profit from federal Schedule C, for the SBD. You are asked, in the Ohio interview, how much of your business income,  you want to deduct.  So, essentially, you do "input the income twice". A common situation is the gain of the sale of business property (in addition to the profit on schedule C) being claimed for the SBD

[cpenn6905]

The state told me that they had received other calls with the same problem with your Ohio state filing...I do not recall the exact process for the state filing...I will try TurboTax again for the '19 filing...This time I will document the process for the state filing...If the same problem exists I will contact TurboTax.

[Hal_Al]

One frequent problem, that  prompts a compliance letter from ODT (Ohio Dept. of taxation) is failure to include losses on the return.

For example: if you have a business profit on schedule C but rental losses on schedule E, you must reduce the Small Business deduction (SBD) by those losses.