The Ohio budget bill signed into law on June 30, 2021 clarified Ohio municipal withholding for remote workers. As of January 1, 2022 employers are required to withholding municipal income tax in the city the employee is actually working in. Employers are no longer allowed to withhold taxes to the principal place of business where the employee was working before the pandemic started.

Employers need to update their withholding as soon as possible to comply with this new law. Employers should have their employees fill out a municipal withholding election form to determine what cities they should be withholding payroll tax for. The election form should also confirm the address where the employee works remotely.

For example, Jane works from home 3 days a week and works in the office 2 days a week. Her employer would need to report 60% of her payroll withholding to the city where she lives. The other 40% of her payroll withholding would be to the city where the office is located.

Please reach out to Olivia Ringer at at Pease CPAs for further information regarding the changes to Ohio municipal withholding.

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