With the passage of the Ohio budget bill, municipal income tax withholding requirements were also modified. Learn what you need to know.
Key insights
- The 2021 – 2022 Ohio budget bill includes changes to certain tax law provisions.
- Employee municipal withholding provisions that were set forth during the pandemic will remain through the end of the year, with a few changes.
Need help reviewing withholding requirements?
The Ohio budget bill signed into law on June 30, 2021, contained several updates to employee city withholding rules related to the COVID-19 pandemic. Review your municipal withholding practices with these changes in mind.
Principal place of work withholding requirement extended
Under the pandemic order, an employer was required to maintain employee withholding to the principal place of work (PPW) that they had pre-pandemic — even if the employee was working from home in another municipality. Although the pandemic-related state of emergency in Ohio was lifted June 18, 2021, the 2021 – 2022 Ohio budget allows employers to continue to assign 100% of an employee’s wages to their PPW until December 31, 2021.
2021 employee refunds from principal place of work
The budget also permits an employee to request refunds for withholding throughout 2021 only. For example, an employee may have city withholding at 2% but they have been working from home in a township where there is no local withholding. That employee can request a refund for that 2021 withholding.
If an employee seeks a refund from their PPW city because of the withholding tax provisions set forth in Am. Sub. House Bill 197 or House Bill 110, the PPW city may not require, as a condition for processing the employee’s request, any statement or other documentation from the employer other than:
- A statement verifying the number of days an employee worked at the employer’s PPW during the year, and
- A statement that the employer did not refund any withheld taxes to the employee. Cities may have a designated form that can be used.
Again, this is an employee refund claim, not an employer refund claim. The Ohio budget did not include any provision related to 2020 refunds; these will continue to be denied or held until the Ohio courts decide the constitutional issues.
How CLA can help
Withholding rules can be complex. Our state and local tax professionals can assist with questions on how to file, what to file, your HR department’s role, and the employee Ohio city withholding rules.