Let`s take an example: Let`s say Mike works 15 days at Blue Ash, has his main place of work (i.e. his office) in Cincinnati, and lives in Batavia. Each of these cities levies an income tax. Mike`s employer must withhold the Cincinnati tax for the 15 Blue Ash days because the 20-day rule was not followed. Mike owes no Blue Ash taxes. What needs to be restricted? An employer should withhold 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. 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 withheld or that should have been withheld in the 12 months ending June 30 (a period referred to as the «retrospective» period). There are three payment frequencies: As of January 1, 2022, there will no longer be specific rules for withholding or refunding claims for remote workers, even if they are not at the primary 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. The new year brings new municipal withholding tax requirements for Ohio employers. As of January 1, 2022, employers will be required to withhold municipal income tax based on where their employees work. Under the «general rule of municipal withholding tax,» employers must withhold tax «for each part of the day worked in a tax municipality where an employee provides services to the employer,» including for employees who work in different municipalities on the same day. 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: We have provided several updates to employer retention rules in 2020 and 2021, starting with Ohio, which issued an emergency order on March 9, 2020 and passed HB 197. HB 197 was intended to simplify the employer`s withholding during the temporary emergency period while workers were removed from their main employment.
Employers were required to continue to retain as if workers were reporting to their primary workplace prior to the pandemic. On June 18, 2021, Governor DeWine terminated the emergency order and employers had 30 days to implement pre-COVID-19 detention procedures. However, lawmakers have stepped in to support employers who are still struggling to effectively run their businesses in a COVID environment. They passed HB 110, which allows, but does not require, employers to withhold workers` wages at their primary workplace prior to the pandemic until December 31, 2021. It is very important for employees to understand how their employer will retain salaries in 2022. When an employer begins splitting wages between a primary workplace and a resident city, employees must work with their employer to track where they work each day. Some employers may continue to use only the primary place of work. In this scenario, it`s important that employees can continue to pay tax estimates for the resident city if necessary, track their city of work every day, and provide receipts if they decide to file a 2022 Ohio claim. There are no legal restrictions on which cities reimburse excess 2022 holdbacks, but with increasing remote work arrangements and their impact on municipal budgets, municipalities should be more creative in reviewing employee claims and require documentation to support their workplace position. In addition to providing assistance around where they work each day, employees claiming reimbursement must generally receive a certificate from the employer stating that their employer agrees with the days the employee reported at the company`s location. In addition, the city of work may require the employee to provide a copy of their 2022 city of residence. However, not all employees will find it worthwhile to apply for a tax refund.
Every employee`s situation is different. It`s important to understand how much money an employee can actually get from their city of work, compared to the credit they may lose in the local city, as well as the cost of preparing and filing an employment refund claim when using a third-party tax provider. There are certainly a lot of twists and turns when you consider Ohio`s municipal retention rules. In addition to contacting your tax team and national and local tax specialists, for more information, you can also: Summary Local income withholding tax isn`t necessarily the most exciting topic, but it can cause a lot of confusion for employers. Some important conclusions are that if you are a small employer within the meaning of the law, you only have to hold back to the place where you have a fixed location. If your employees work in multiple locations, you`ll need to follow the steps to determine where you need to withhold and remit taxes.