Federal & State Regulations | Employment taxes - Ohio | J. J. Keller® Compliance Network

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Summary of differences between federal and state regulations

Income tax withholding

All employers maintaining an office or transacting business in Ohio and required to withhold federal income tax must register by completing and filing Form IT-1, Application for Registration as a Withholding Agent, with the Ohio Department of Taxation.

Every employer maintaining an office or transacting business within the State of Ohio and making payments of any compensation to an employee, whether a resident or nonresident, must withhold Ohio income tax.

Withholding is not required if the compensation is paid for or to:

1. Agricultural labor as defined in Division G of Section 3121 of Title 26 of the United States Code;

2. Domestic service in a private home, local college club, or local chapter of a college fraternity or sorority;

3. Service performed in any calendar quarter by an employee unless the cash remuneration paid for such service is three hundred dollars or more and such service is performed by an individual who is ordinarily employed by such employer to perform such service;

4. Services performed for a foreign government or international organization;

5. Services performed by an individual under the age of eighteen in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution or when performed by such individual under the age of eighteen under an arrangement where newspapers or magazines are to be sold by him at a fixed price, his compensation being based on the retention of the excess of such price over the amount at which newspapers or magazines are charged to him;

6. Services not in the course of the employer's trade or business to the extent paid in any medium other than cash;

7. Residents of Michigan, Indiana, Kentucky, West Virginia, and Pennsylvania, due to reciprocal agreements with Ohio.

Every individual who performs services subject to either the control and/or will of an employer, whether as to what shall be done and/or how it shall be done, is an employee for purposes of Ohio income tax. It does not matter that the employer permits the employee considerable discretion and freedom of action, so long as the employer has the legal right to control either the method and/or result of the services.

All employees, except residents of Michigan, Indiana, Kentucky, West Virginia, and Pennsylvania, who work in and/or perform personal services in Ohio are subject to withholding of Ohio income tax to the extent of compensation paid for their services in Ohio.

Unemployment taxes

All states finance UC primarily through contributions from subject employers on the wages of their covered workers. In addition, three states (Alaska, New Jersey, and Pennsylvania) collect contributions from employees. These taxes are deposited by the state to its account in the UTF in the Federal Treasury, and are withdrawn as needed to pay benefits.

Many states have adopted a higher tax base than what is provided in FUTA. Hawaii's wage base is usually higher and changes periodically. In all states, an employer pays a tax on wages paid to each worker within a calendar year up to the amount specified in state law. In addition, most of the states provide an automatic adjustment of the wage base if federal law is amended to apply to a higher wage base than that specified under state law. As a result of the many variables in states taxable wage bases and rates, benefit formulas, and economic conditions, actual tax rates vary greatly among the states and among individual employers within a state.

Wages subject to unemployment tax in this state equal $9,000.

Minimum and maximum rates in this state are 0.2 and 7.5 %. Rates apply to experience rated employers only and do not include applicable surtaxes or penalties.