You are here: HomeTaxes & ComplianceOhio House Bill 5 - City Witholding Changes

We wanted to make you aware of changes that apply to city withholding effective January 2016, with the passage of Ohio House Bill 5 (see below), that could affect how you currently report work location for your employees.

We would suggest that you review the Small Business Exception for Withholding with your accountant or bookkeeper.  If your business qualifies and you would like us to implement this exception, please give us a call at 440-926-2333.

20-Day Occasional Entrant Rule
Currently, if an employee spends 12 days or less in a municipality, no withholding is required in that city. HB5 changes this period to 20 days. Consequently, if you have employees who spend 20 days or less in a municipality, no withholding is required for this municipality and instead the employer will be required to withhold tax for the municipality, if applicable, in which the employee’s principal place of work is located. If you think that the employee will spend more than 21 days in a new municipality, you should withhold tax from day one in the new municipality.2

These provisions will ensure that in most instances a jurisdiction will receive tax revenue.

Small Business Exception for Withholding
Furthermore, HB5 authorizes a simplified approach to employee tax withholding for small employers. The provision provides that small employers only have to withhold municipal income tax to their fixed location municipality, without regard to the 20-day rule. A small employer is a business that has overall gross receipts of less than $500,000.

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