12/23/2021

Hybrid Work Arrangements and Ohio Municipal Withholding Update

What you need to know

While the [COVID-19] pandemic continues to impact our daily lives, some things are going back to the pre-COVID norms. The general Ohio municipal withholding tax rule states that employers must withhold based on where an employee’s work is actually performed, unless an exception applies. One of those exceptions is the 20-day, occasional entrant rule which shields an employer from a withholding requirement until an employee has worked in a municipality for 20 days. That rule had been suspended during the pandemic but will be reinstated as of Jan. 1, 2022. See our previous article about that rule here. Please note that the principal place of work concept only applies in the context of the occasional entrant rules and NOT to hybrid work arrangements that lay out a schedule of work between an employee’s place of residence (“home city”) and employer’s location (“work city”). If more cities are involved, the exception might apply.

There is more good news! Refunds of taxes paid to a city other than where the work was actually performed are available for 2021. The taxpayer files this refund claim with the municipality. See our previous article here for more details on employer certification requirements.

There is some bad news, however, in that it is still unclear if refunds of taxes paid to a city other than where the work was actually performed are available for 2020. Litigation is still pending.

Please select this link to read the complete blog post from OSAP Member VonLehman CPA & Advisory Firm.