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Ohio Employers Take Note: Municipal Tax Changes Go Into Effect This Month

Under recent legislation which take effect this month, Ohio employers with under $500,000 in annual total revenue will be responsible to withhold and pay taxes only for employees in the municipality where the business is based. This rule applies regardless of the number of days that an employee works in other municipalities during a year. These employers will no longer need to produce W-2s for every municipality in which their employees work, contrary to prior law.

For nonresident employees of smaller businesses, a new rule prohibits the taxation of the employee’s income by any municipality other than the municipality where the business is principally located. Further, the small business rule allows any employee to receive a refund of taxes withheld when that employee can demonstrate he did not actually perform services in the municipality where taxes were withheld.

Finally, for employees of larger businesses and individuals receiving non-wage compensation, the act nearly doubles the number of days (from 12 to 20) that a nonresident may work in a city or municipality without having to pay income tax there.

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