Ohio Local Tax Withholding Requirements

The withholding tax rate in the city of Toledo, Ohio, will increase from 2.25% to 2.50%. There will certainly be questions about the new municipal income tax rules. The Ohio Society of CPAs has released its Guide to Questions and Answers on Withholding and Refunding Municipal Income Tax, which can be found at: ohiocpa.com/docs/default-source/tax_resources/muni_tax_withholding_2021_faq_document.pdf Recent legislation in Ohio changes the rules that an employer must withhold municipal tax from its employees` income. The old “12-day rule” continues to apply until 31.12.15, but from 01.01.2016 the new “20-day rule” applies. Best of all, no retroactive retention is required! As of January 1, 2022, there will no longer be special rules for withholding or refunding applications for remote workers, even if they are away from the main workplace due to COVID. An employee can claim a refund of all taxes withheld for the primary workplace for each day they worked remotely. Employers are generally required to retain the primary place of work, unless the employee works 21 days or more per year in another jurisdiction. Please contact Matt Dodge of HBK SALT in mdodge@hbkcpa.com or Tim Adams in tadams@hbkcpa.com for assistance in complying with the new retention rules. We often hear that employers will simply revert to Ohio`s pre-COVID municipal withholding rules in 2022, but most businesses have changed over the past couple of years. Many more employees are working completely remotely or on a hybrid schedule where they split their time between the office and home Most employers don`t have procedures in place to track where an employee spends their time.

Ohio`s municipal conservation rules may be interpreted differently by each reader. One thing is certain, though: Ohio employers need to identify a method to track where employees work each day. Employers could track key card scans in the office or require employees to track where they work every day. There are also phone apps and work software that can easily accomplish such a task with minimal effort. In the past, most employers refused an employee`s primary job. A primary workplace is defined as a “fixed location” that an employer controls and to which employees must report “regularly.” There are several exceptions to this rule, including: What should be retained? An employer should be exempt from wages, wages and other remuneration (i.e. bonuses, commissions, etc.) paid to an employee. Ohio and local municipalities most often follow the federal definition of wages as compensation for services. However, if there are certain types of compensation you give to an employee outside of the “norm”, it is best to work with an appropriate tax advisor to understand if this compensation is subject to withholding tax. So let`s review your local withholding and remittance obligations for the people who work for your organization.

How often should I make a transfer? In Ohio, the frequency of filing income tax returns and the frequency of payments each calendar year are determined based on the total amount of state and school district taxes incurred in the past 12 months through June 30. June were or should have been preserved (so-called “retrospective” period). There are three payment frequencies: If you have any questions about compliance with Ohio`s new municipal withholding tax requirements — including questions about eligibility for an exemption — please contact tax attorneys Walter Haverfield, Vince Nardone, and Mike Sorice. Your contact information can be found below. These days, where employees aren`t necessarily stuck in an office, it can be difficult to understand what your local withholding income obligations may be for employees in your business. If only it were as simple as withholding tax in one place and filing a single return. However, recent statistics suggest that there are more than 300 separate municipalities in the state of Ohio that have a local income tax. Additionally, with the increase in the number of employees working from home or in coworking spaces, it can be difficult to keep track of your obligations to withhold and remit local taxes on your employees` income. Whether you have a few employees or hundreds, it can be difficult to figure out when to hold back, how often to transfer, and whether where your employee does the work matters. In an effort to simplify Ohio`s municipal withholding rules, Ohio has also updated its rules on what to do when an employee works in multiple cities in the day before the pandemic. Typically, an employee assigns their day to the place where they spent most of their time on work tasks that day. In addition, Ohio outlines certain employee responsibilities, such as: the greatest travel time to and from locations during a day that should be allocated to the employee`s primary workplace when calculating where most of the time was spent each day.

If employers do not have a location in Ohio, or Ohio employers agree that employees may be completely away from their place of residence, the withholding decisions are simple and the employer will retain in the employee`s hometown. But how should an employer retain an employee when there is a hybrid work arrangement? The answer may depend on several factors, including: As the pandemic drags on, employees continue to split their time between the office and home, leaving employers and employees with many unanswered questions about the city`s income withholding. Here`s a look at the reality Ohio communities have faced over the past two years and where they are currently in the state. While many businesses have benefited from the streamlined COVID-related withholding tax regulations, some employees have been negatively impacted by the transfer of their work responsibilities to lower- or zero-tax municipalities. HB 110 explicitly allows laid-off employees to submit claims to their main city of work for days they only worked outside the city in 2021. The legislator considered extending the repayment option in HB 110 until 2020, but ultimately decided to leave the repayment option to the courts in 2020. Several taxpayers have filed lawsuits against Cleveland and Columbus, among others, for 2020 tax refunds for days not worked at their primary workplace due to Ohio`s stay-at-home order. While we have seen several cases resolved or decisions made against a taxpayer with respect to employer withholding tax, none of these closed cases involved an employee`s ability to claim a refund for 2020. Pending further guidance for 2020, employees can still submit 2020 refund claims within three years of due or paying tax, whichever is later.

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