Many employers have seen a shift to employees working from home since the onset of the pandemic. The state of Ohio implemented laws to require and/or allow employers to withhold at the location they were previously withholding prior to the pandemic. Starting in 2022, employers will be required to withhold in the municipality in which the employee is working.
As an example, if Cassady Schiller has an employee that was working at our Blue Ash office in March of 2020 and has since started working 2 days from her home in Cincinnati and 3 days from our Blue Ash office, in 2022 we will be required to withhold Cincinnati tax for the 2 days worked at home and Blue Ash tax for 3 days worked in the office. If we now have 40 people working from home in 40 different municipalities, that now means we will need to withhold in all of the municipalities starting in 2022. To make matters worse, it also means Cassady Schiller will be required to file business income tax returns in each of those jurisdictions.
As you can see from the above example, employees working from home can create a significant wave of additional compliance. Employers need to be setting up processes to track this and talking with their payroll providers to implement these withholding rules.
This undoubtedly leaves many businesses with questions about their own unique circumstances. The Ohio Society of CPA’s has recently addressed many of the questions surrounding this issue and the issue of employees filing for municipal refunds with a set of FAQ’s. There is a lot of useful information in these FAQ’s, so we wanted to share. The FAQ’s can be found at https://ohiocpa.com/docs/default-source/tax_resources/muni_tax_withholding_2021_faq_document.pdf
If you have questions regarding how this impacts your business, please reach out to your Cassady Schiller contact so that we can help you wade through these murky waters.