CLEVELAND — If you've received an audit from the Central Collections Agency and thought no big deal, think again, because now you may receive a threat of legal action from the city of Cleveland.
Dozens of Clevelanders started seeing audit letters in the mail in September and October.
The audit notice, simply put, said the city had obtained federal income tax information from the Internal Revenue Service (IRS), indicating the person might have received income that may be subject to Cleveland's income tax.
The city tax form is a municipal income tax document. It asks for your employment, residence tax, and income information. It's also a standard form that is separate from your regular filings.
The problem is, most of those who received the notice told me they'd never heard about an additional city income tax form needing to be filed.
The city's finance department acknowledges it can do better when it comes to informing the community of this tax responsibility and "will certainly commit to doing just that moving forward."
Now, there's a new issue arising.
Stephanie Thornton and her daughter, Devin Thornton-McKinney, just got hit with a threatening letter from the CCA stating that it will take legal action if penalties are not paid by Nov. 20.
According to the CCA, Thornton owes $754.65 in penalties. Her daughter owes $325.
"It's heartbreaking," Thornton said. "This is the worst time ever. Absolute worst time ever. I work. I work for the government myself, but I'm still struggling to pay my bills."
Thornton has lived in Cleveland for 53 years.
She remembers the city mailing tax forms to her in the 90s, but "then they stopped."
Thornton used to file with H&R Block, but said it became too expensive, so she's been filing on her own through an online service.
"None of the online sites ever offered you the option to file city taxes, so I'm thinking if it's that important, it really should have been there. They asked about my federal. They asked about my state.
Nowhere should I file the city tax, so I didn't bother with it for decades," Thornton said.
She said she got an audit letter earlier this year.
That's when Thornton found out she owed $25 because she didn't update her W-4 in a timely manner.
There was a small fine associated with it, she told me.
"I paid the $25 and I said, 'I'll pay the fine for that year because I earned that one.' But the rest of this, come on. I've been a resident of this city for 53 years. I've been in this house since 2009. I've never received any other notification besides these," Thornton said.
As for Thornton-McKinney, she said she provided tax documents to the CCA in September 2024.
After that, she told me she didn't hear anything from the agency, not even a confirmation email that her documents had been received.
"It just went radio silent. Honestly, a part of me thought that I was being scammed," she told me.
She has since moved out of state.
But then, through her mom, she received a threat of legal action from the city.
Both letters note delinquent taxes as $0, but list penalties.
"You're asking me to not pay my mortgage. You're asking me not to pay my car insurance, my car note. How does that seem reasonable?," Thornton said.
Thornton told me she asked a CCA representative in February for a website where she could file in the future, but was provided an inaccurate web address.
She also claims a dispute process was never mentioned as an option, despite the city telling me residents are able to do so.
We want to reiterate that the audit letters people may have received are more so general inquiries as it’s just the information-gathering phase at the beginning of the collection process. It is not our intention to alarm anyone, as we may actually owe them money. The hope is these individuals will provide documentation and then we can determine if taxes are still owed or if we need to issue a return. Penalties can be disputed. Those are then reviewed and decided on a case-by-case basis. We always try to work things out and help people when we can.
The calculations and criteria for penalties and interest are set by the State and defined in the Ohio Revised Code (ORC).
Late filing penalty – Prior to tax year 2023, if a municipal income tax return was not filed in time, a $25 penalty could be imposed each month it remains unfiled, with a $150 cap per year. Starting in tax year 2023, that annual cap went down from $150 to $25. Here are some examples:
- If someone didn’t file a 2022 return (or 2021, or 2020, etc.) for four months after the deadline has passed, they may face a $100 penalty (i.e. $25 x four months).
- If someone didn’t file a 2022 return (or 2021, or 2020, etc.) for eight months after the deadline has passed, they may face a $150 penalty. In this instance, you may think the penalty would be $200 (i.e. $25 x 8 months), but, due to the annual cap, the maximum penalty is set at $150.
- If someone didn’t file a 2025 return (or 2024 or 2023) for four months after the deadline has passed, they may face a $25 penalty. This is because, in this instance, it occurred after the cap limit went into effect.
Late payment penalty – This is separate from the late filing penalty. This penalty kicks in if individuals owe money to the respective municipality and, as outlined in the ORC, is set at 15% of the balance that is unpaid after the payment deadline.
Interest – This accrues on any unpaid income tax based on rates set forth in the ORC (the annual rate for calendar-year 2025 is 10%). This only accrues from the late payment penalty, NOT the late filing penalty.
There are three different scenarios that come from someone being audited:
- Taxpayer owes the city – Subject to late filing penalty + late payment penalty + interest.
- City owes the taxpayer – Any applicable penalties/interest are wiped clean and the person is provided with their full refund.
- Neither owes one another (it’s essentially a wash) – Subject to late filing penalty only and not the late payment penalty.
Refunds have a three-year statute of limitations in the State of Ohio – meaning if a taxpayer is actually owed money by a municipality, they have three years to recoup that refund.
"Several people have reached out since the initial stories have aired – many of whom we’ve been able to help by clarifying things, providing guidance on processes, and/or offering other forms of support. We will continue helping whoever needs it, so we want to encourage people to reach out if they need assistance," a city finance department spokesperson told me on Wednesday.
Thornton and her daughter said they want to see more transparency from the city moving forward.
"If you're gonna do better for your residents, it starts with completely wiping the slate clean. It starts with: 'We didn't inform our residents of where they needed to file or the importance of filing. We didn't provide them this information timely. We didn't make it a good visual. We didn't provide the sites that they needed to go to. We understand that a lot of our residents do file their taxes with these online programs and they don't offer those services, nor do they give them any suggestions on where to go to. We didn't provide enough,'" Thornton said.
The city has previously told me it plans to put out reminders on social media as well as partner with local media outlets to share the information.
"It's not somebody else's responsibility to inform your residents of what's needed. If you're collecting taxes from them, that's your responsibility, not everyone else's responsibility," Thornton said. "Let's be reasonable."
Although her daughter no longer lives in Ohio, Thornton-McKinney told me she hopes to see the city of Cleveland make a change.
She said having to deal with recent moving costs and a new job on top of being threatened by the city has opened a new can of stress for her.
"Pandemonium's breaking out because no one knew about this," Thornton-McKinney said. "I still have family and friends and loved ones that do [live in Cleveland] so whether or not I'm there or I'm in another state, what happens to them still affects me."
We've continued asking the city for the number of Clevelanders who have recently received an audit, and now for data on how many people have been threatened by the city with legal action due to city income tax form issues.
Neither question has been answered.
More information regarding the filing process can be found on this page of the CCA site..
If you want to file a dispute, the city asks you to do so by emailing: IndividualTax@clevelandohio.gov.
