Ohio Local Tax Changes – Effective January 1, 2022

 In Payroll, Tax Compliance

During the pandemic, Ohio legislators passed an emergency rule that allowed all employers to withhold tax from employees based on their principal place of work or business location, even if the employee was working from home in another municipality. This rule was set to expire soon; however, the 2021 – 2022 Ohio Budget Bill has extended this rule and allows employers to continue to assign 100% of an employee’s wages to their business location until December 31, 2021, even if the employee is working from home in another municipality.

Effective January 1, 2022, if employees have not returned to your place of business, and continue to work from home, they will need to be taxed based on their home location being their principal place of work.

 

What steps do I need to take for next year?

  • You may need to register with additional local tax agencies if you have employees working from home in locals not currently registered.
  • If you have already registered for new local tax agencies, let your Ahola payroll specialist know immediately, so we can update your account.
  • Please note: If you are a tax pay client, Ahola will remit payments and returns on your behalf to these locals. If you are a non-tax pay client, we’ll send you tax notices and returns when applicable.

How do I stay compliant for 2021?

  • You can continue to withhold tax from employees based on your business location while employees are working from home.
  • ​​Employees have the option to claim a refund based on taxes paid to the business location if they weren’t working there and remit payment based on their work from home location.
  • For any employees working from home permanently, you can choose to withhold local tax based on their home locations now; you don’t need to wait until the new year. You’ll need to register for the new localities and let Ahola know to update your account. You’ll also need to let us know which employees need to be assigned to the new locals.
  • Consult with your CPA about whether it is more beneficial to your employees for you to make the change now or in 2022.

 

Again, these changes do not go into effect until January 1, 2022, we are reaching out to alert you so you have time to plan for these changes. Please remember to let your Payroll Specialist know about any new local tax agency registration and which employees need to be assigned to these locals. Feel free to contact your dedicated Payroll Specialist with any additional questions or concerns.

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