Policies & Procedures as of 1-1-16

TABLE OF CONTENTS

 Mission Statement

 PROCEDURAL POLICIES

Employee Business Expense (2106)  

20 Day Occasional Entry Rule

Third Party Sick Pay

Extension Guidelines, & Extension Request Criteria

Extension Request Guidelines

Guidelines for Business Offsets

Debt Cancellation (1099-C )

Student Tuition (1098-T)   

Travel Days Out of Town

Withholding Due Dates

Quarterly Withholding

Monthly Withholding 

Correspondence & Declaration Letter

Promissory Note Guidelines

Filing Penalty and Interest Guidelines

Guidelines For Establishing Residency

Guidelines For Locating New Taxpayers/Businesses

Lottery & Gambling Tax Guideline

 


 

MISSION STATEMENT 

As employees of the City of Ashland Income Tax Division, our purpose is to “ Provide Professional, Impartial and Courteous Service to all Taxpayers.”

By:

·         Collecting tax payments

·         Educating and assisting taxpayers in complying with the Income Tax Ordinance

·         Enforcing the Income Tax Ordinance in a fair and equitable manner

·         Maintain all tax documents on file as required by law

 



EMPLOYEE BUSINESS EXPENSE-FORM 2106

        According to Codified Ordinance Chapter 230.02(45) and 230.19, and 22: the Director of Finance shall make all rules, regulations and decisions or changes thereto, regarding the administration of the Ashland Municipal Income Tax.

The Ashland Income Tax Office will accept the same Federal 2% AGI (adjusted gross income) 2106 deduction only when complete and accurate documentation is provided.  (Form 2106 and Schedule A)

If Schedule A is not available then a breakdown of all deducted amounts will be required.

2106 deductions must be accepted according to H.B. 95 effective date; 9/24/2003

 



20-DAY OCCASIONAL ENTRY RULE

In accordance with Chapter 230-04 (2)(a) (i) (ii) effective on and after January 1, 2016, an employer shall not withhold City of Ashland income tax on the first 20 days of an employee’s compensation if all of the following apply:

(1)  The individual is not a resident of the City of Ashland.

(2)  The compensation is paid for personal services performed by the individual in the City of Ashland on twenty or fewer days in the calendar year.  For purposes of the 20-day calculation, any portion of a day worked in Ashland shall be counted as one day worked in Ashland.

(3)  In the case of an individual who is an employee, the principal place of business of the individual’s employer is located outside of the City of Ashland and the individual pays tax on compensation described in division (2) of this section to the municipal corporation, if any, in which the employer’s principal place of business is located, and no portion of that tax is refunded to the individual.

Beginning with the twenty first day, the employer of said individual shall begin withholding Ashland income tax from remuneration paid by the employer to the individual, and shall remit the withheld income tax to the City of Ashland in accordance with Chapter 230-04 stated above.  At no time will the first twenty days be taxed.

If the individual is self-employed, it shall be the responsibility of the individual to remit the appropriate income tax to the City of Ashland.

Occasional Entrant rule amended 1/1/2016     

 



TREATMENT OF THIRD PARTY SICK PAY

ANALYSIS

In order to fully understand weather or not Third Party Sick Pay is taxable by a Municipal Government, you must look at several different areas.

First: United States Code: Title 3121 states in part:

For purposes of this chapter, the term “wages” means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include-

   (2) the amount of any payment (including any amount paid by an employer 

   for insurance of annuities, or into a fund, to provide for any such payment)

   made to, or on behalf of, an employee or any of his dependents under a plan

   or system established by an employer which makes provision for his

   employees generally (or for his employees generally and their dependents or

   for a class or classes of his employees (or for a class or classes of his

   employees and their dependents), on account of –

 

(A)    Sickness or accident disability (but, in the case of payments made to

 an employee or any of his dependents, this subparagraph shall exclude

 from the term “wages” only payments which are received under a

 workman’s compensation law),

 

Secondly: Ohio Revised Code 718.01 (H) (10) States:

 A municipal Corporation shall not tax any of the following-

          Employee compensation that is not “qualifying wages” as defined in

          Section 718.03 of the Revised Code;

 

Thirdly: Ohio Revised Code 718.03 (A) (2) (a) (ii) States:

            As used in this chapter:-

              “Qualifying wages,” means wages, as defined in Section 3121 (a) of

               the Internal Revenue Code, without regard to any wage limitations,

               adjusted as follows:

                        For purposes of division (B) of this section, any amount included in

                        wages if the amount constitutes payment on account of sickness or

                        accident disability.

 

With these sections in mind it is the position of the Ashland City Income Tax Department that Third Party Sick Pay is not taxable.

 



EXTENSION GUIDELINES

Withholding Accounts

No extension request will be allowed for the “Employer’s Monthly/Quarterly Return of Tax Withheld” (W-1).

The Income Tax Ordinance does not provide for an extension of time to file reconciliation (W-3) of returns and employee W-2’s.

Extension Request Criteria

The following documentation / attachments must be included for an extension to be approved.  This criterion is in addition to the guidelines for delinquency of each account.

1.  The extension request must be filed timely.  It must be received prior to the original filing           deadline due date of return.

2.  Any estimated tax due is to be paid in full in a timely manner.  It must be paid by the due          date of the original return.

3.  A first quarter estimated tax due for the current year must be completed , and paid                 accordingly.

4.  A copy of the federal extension request should be attached.

Extension requests will not be granted if any of the previous is missing from the request.  Extensions will also not be granted if any delinquency exists in the account as detailed in the Extension Request Guidelines.

The above criteria do not include an extension for payment, these will not be granted.

EXTENSION REQUEST GUIDELINES

Net Profit Accounts

Due Dates: Net Profit Income Tax Returns ORC Sec. 718.05(B)  Tax Year 2016.

The due date MUST be the 15th day of the fourth month following end of Tax Year.

For tax years ending December 31, 2016 the due date is April 15, 2016.

Requests for extension are denied for the following:

1.    If request is received after filing deadline date-April 15th

2.    If request is for a fiscal filer it must be received within the 120 day

     period of their year end date:

·        January 31     by    May 31

·        February 28   by    June 30

·        March 31        by    July 31

·        April 30           by    August 31

·        May 31           by    September 30

·        June 30          by    October 31

·        July 31            by    November 30

·        August 31       by    December 31

·        September      by    January 31

·        October 31      by    February 28

·        November 30  by    March 31

·        December 31   by   April 30

3.  Missing previous years returns

4.  Outstanding balances

5.  Missing reconciliation and/or W-2’s

6.  Withholding shortage or delinquency

7.  Extension shows and anticipated tax due, and no payments have been received.

8.  Any delinquency shown in either the net profit or withholding accounts.  A delinquency is considered to be missing filings or missing payments.  If a return is missing pertinent documentation and requests for such documentation have been ignored, denial can be based on noncompliance.  We do not routinely deny extension requests based on audit procedures or audit questions.  Individual judgment will be required.

9.  Extensions will not be granted if return is received more than 30 days passed the extension requested date, unless an additional extension is requested prior to the initial requested date.  Ord. 62-72, passed 12/5/72.

For taxable years beginning after 2003, 718.059(D)(4)repealed 3/23/2015.

Extensions ORC Sec. 718.05(G)(2)(a)(b)(c)  Tax Year 2016 and after.

Any tax payer that has duly requested an automatic six month extension for filing the taxpayer’s federal income tax return shall automatically receive an extension for the filing of a municipal income tax return  the extended due date of the municipal income tax return shall be the 15th  day of the 10th month after the last day of the taxable year to which the return relates. A tax payer that has not requested or received a six month extension for filing the taxpayer’s federal income tax return, may request that the tax administrator grant the taxpayer a six month extension of the date for filing the taxpayer’s municipal income tax return.  If the request is received by the tax administrator on or before the date the municipal income tax return is due, the tax administrator shall grant the taxpayer’s requested extension.

   

The IRS Authorizes 6 months automatically from the original due date.

             Individual and Partnership Returns      October 15th

            Corporate Returns                               October 15th

An extension of time to file under division (G)(2) of this section is not an extension of time to pay any tax due unless the tax administrator grants an extension of that date.

If denied, a letter of denial is sent to the taxpayer/tax preparer.  All copies are retained in each separate account whether it be denied or granted.

 



GUIDELINES FOR BUSINESS OFFSETS

 Taxation of Distributive Share   ORC Sec. 718.01(F)(9)        January 1, 2004

It is the consensus of a number of municipalities that municipalities may tax the flow thru income of a shareholder in an S-Corp provided the income is allocated or apportioned as Ohio income.

Note:  Those municipalities that qualify for the special provision to tax all distributive share income must have the issue on the November 4, 2003 ballot.   Ashland did not do this.

 



DEBT CANCELLATION

United States Code: Title 3121 states in part:

(1) For purposes of this chapter, the term “wages” means all remuneration for employment,        including the cash value of all remuneration (including benefits) paid in any medium other        than cash; except that such term shall not include-

(2) the amount of any payment (including any amount paid by an employer 

     for insurance of annuities, or into a fund, to provide for any such payment)

     made to, or on behalf of, an employee or any of his dependents under a plan

     or system established by an employer which makes provision for his

     employees generally.

 

Ohio Revised Code 718.02 (a)(2) States:

            Wages, salaries, and other compensation paid during the taxable period to individuals employed in the business or profession for services performed in the municipal corporation to wages, salaries and other compensation paid during the same period to individuals employed in the business or profession wherever the individual’s services are performed, excluding compensation from which taxes are not required to be withheld under section 718.011 of the Revised Code.

 

The Ohio Revised Code is silent as to debt cancellation, therefore the City of Ashland will tax debt cancellation.



TUITION FORM 1098-T

 Student Tuition is not a taxable item to the City of Ashland.

 



REDUCING TAXABLE INCOME DUE TO JOB-RELATED TRAVEL DAYS OUT OF TOWN

 Non-residents who are employed in the City of Ashland, but are required to travel to work sites outside of Ashland can reduce their taxable income according to the allocable days out of town.

1. The travel must be a required part of job performance.

2. The travel must be detailed.  A log or typed letter on employer letterhead of days out,               destination of travel must be provided.  An authorized agent or supervisor must certify this.

3. Holiday(s), sick days, vacation days, annual leave taken, etc.  is not considered to be travel     days and cannot be deducted.  These types of compensation are taxable to the City of             Ashland.

4. Severance pay, separation pay, or other similar types of retirement incentives, wage                 continuations, etc. are also fully taxable, and cannot be deducted.

5. A percentage of non-taxable days can be determined by dividing the number of days               worked out by the total available (260 standard). 

This percentage can be multiplied by the total taxable compensation to arrive at the adjusted amount to be excluded.  Documentation to support calculations must also be included.

All logs or letters will be subject to audit and authorizing agent or supervisor will be contacted for clarification if necessary.  Returns received without full documentation required will be sent a letter asking the taxpayer for completion of missing documentation.  A return is not considered to be “filed” until all required information and documentation is attached.


WITHHOLDING DUE DATES

DUE DATES FOR QUARTERLY WITHHOLDING PAYMENTS 

       QUARTER                                       DUE DATE

       1ST Quarter                                       April 30

       2nd Quarter                                       July 31

       3rd Quarter                                        October 31

       4th Quarter                                        January 31

Payments that are postmarked on or before the due date will be considered to be timely.  Postage meter dates will not be used in determining timely receipt of a payment.

DUE DATES FOR MONTHLY WITHHOLDING ACCOUNTS

          MONTH                                        DUE DATE

           January                                         February 15

          February                                        March 15

          March                                             April 15

          April                                                May 15

          May                                                June 15

          June                                               July 15

          July                                                August 15

          August                                           September 15

          September                                    October 15

          October                                         November 15

          November                                     December 15

          December                                     January 15

Payments that are postmarked on or before the due date will be considered to be timely.  Postage meter dates will not be used in determining timely receipt of a payment.


 

DUE DATE GUIDELINES FOR CORRESPONDENCE & DECLARATION LETTER

The Income Tax Office will audit and/or amend tax documents when it is necessary upon receipt of the tax document  The Income Tax office will initiate correspondence to the taxpayer. Declaration letters will be issued to any taxpayer that is not being withheld at a 1.5% or higher tax rate and has shown a tax liability of $200.00 or more from the previous year. (Declarations are addressed in Chapter 230.07 /  Passed ) The taxpayer is given 10 days or until the end of the month, whichever comes first, to respond to our correspondence.  If no correspondence is received, the following is guidelines that will be followed when there is no correspondence from the tax payer.

        END OF MONTH

            A billing letter is generated by the computer and mailed to the taxpayer showing all tax, penalty, and interest due.

      30 Days

            After 30 days a letter of review is sent to the taxpayer, stating that no payment has been received.  The taxpayer is then given 10 working days to respond with payment or their intentions on this matter.

     40 to 45 Days

           The Law Director’s office sends correspondence asking for compliance to our letter.

   50 to 55 Days

            Court action is initiated by the Law Director’s office.  At this  point the Income Tax office no longer handles the matter.

 Effective Date:  January 1, 2016

 


 

PROMISSORY NOTE CRITERIA

The following criteria will be used to review any request for a Promissory Note.  Each situation is to be reviewed individually and must qualify based on situations detailed below.  These situations must have occurred recently enough to currently impact the individual’s economic situation and need for the Promissory Note.

1.  Significant lapse in employment, decreasing income.

2.  Loss of job/employment; spouse’s loss of job/ employment.

3.  Health emergency for self/family member which resulted in:

a.    Loss or reduction of income

b.    Increased medical expense (not covered by insurance)

4.  Similar circumstances which have resulted in unexpected lapse of employment or                  income.

A Promissory Note will follow a regularly scheduled signed payment arrangement either, weekly, bi-weekly or monthly, depending on receipt of income / frequency of income. Declaration payments for the next year must be part of the Promissory Note.   A lapse in payments will result in account being turned over to the City Law Directors office for court action.  Length of Promissory Notes will vary depending on the agreement, which normally would be December 31 of the filing year but in no instance be in effect past March 31 of the preceding year. A Promissory Note will not be granted for an amount of $50.00 or less.

Subsequent tax year liabilities will not be added to a Promissory Note.  Only one Promissory Note at a time will be permitted per account.  If account has a balance due, future Promissory Notes will not be approved.  Alternative financing must be arranged.

The Finance Director will receive reports on a periodic basis or when requested.

Effective date: January 1, 2016


 

PENALTY AND INTEREST GUIDELINES

Any request for review of an assessed late filing and/or non-payment penalty will be granted by the Income Tax Administrator.

As a courtesy penalties will be waived if a taxpayer is filing an Ashland return for the first time due to being a new resident or business of the city. 

Penalty assessments on returns for which an extension has been granted will be based on 30 days after the extension was allowed,  whether or not the tax office had to initiate correspondence reminding them to file.

In addition to those listed above, penalties may be waived only when some type of extenuating circumstance is brought to the attention of the Income Tax Administrator.  The circumstances that would result in late filing could include catastrophic illness, family emergencies, etc. The taxpayer must be able to provide verification/documentation for such circumstances.  Determination will be made based the taxpayer’s physical inability to file timely.

Interest will not be abated.

If further review is requested it must be done in writing and submitted to:

          Larry D. Paxton

          Director of Finance

          206 Claremont Avenue

          Ashland, OH  44805


 

GUIDELINE FOR ESTABLISHING RESIDENCY

A taxpayer’s residency is the place where individuals have a clearly established domicile.  Some may live part-time in more than one area without a clear indication of domicile.  A taxpayer who lives in more than one area should take steps to establish only one of those states as his or her domicile.

 Factors considered in determining domicile:

 For the purpose of determining whether an individual is domiciled in the City of Ashland for all or part of a taxable year, factors that may be considered include, but are not limited to, the following:

          (a) The individual's domicile in other taxable years;

          (b) The location at which the individual is registered to vote;

          (c) The address on the individual's driver's license;

          (d) The location of real estate for which the individual claimed a property tax exemption                 or reduction allowed on the basis of the individual's residence or domicile;

          (e) The location and value of abodes owned or leased by the individual;

          (f) Declarations, written or oral, made by the individual regarding the individual's                            residency;

          (g) The primary location at which the individual is employed.

          (h) The location of educational institutions attended by the individual's dependents as defined in Section 152 of the Internal Revenue Code, to the extent that tuition paid to such educational institution is based on the residency of the individual or the individual's spouse in the municipal corporation where the educational institution is located;

          (i) The number of contact periods the individual has with the City of Ashland. For the                      purposes of this division, an individual has one "contact period" with the City of Ashland if the individual is away overnight from the individual's abode located outside of the City of Ashland  and while away overnight from that abode spends at least some portion, however minimal, of each of two consecutive days in the City of Ashland.  

Address on legal documents and passports.

Address on registration of vehicle, boat, or plane.

Ownership of personal residence. 

Filing of state income tax and property tax returns. 

Address on federal income tax return. 

Claiming homestead exemptions. 

State where a will is executed and probated. 

Location of important personal records. 

Location of business/professional activity. 

Location of bank accounts, investment accounts, or safe deposit box. 

Memberships in clubs or religious organizations. 

Filing of a statement of domicile. 

Note: This statement may not be all inclusive, other criteria may apply as situations arise.

 


 

GUIDELINES FOR LOCATING NEW TAXPAYERS

INDIVIDUALS

 All businesses withholding Ashland City tax are required to file W-2’s or a computer generated report stating the same information as a W-2 with the Ashland Income Tax office.  These W-2’s are then checked 100% to see if the correct amount was withheld and to see if the people with Ashland addresses are in our tax system.  They are then checked to see if they are current with their filing of returns (no years missing).  When checking to see if an individual is in our system the following steps are taken:

1.  Name search.

2.  Address search.

3.  Social Security number search.

If the individual can not be found after the above steps are taken.  They are then added to the tax computer system and sent a letter asking them to file the required tax return.  The letter also asks if they should file any prior years with us.

If the individual does appear in our computer system.  The account is then checked to make sure all filings are up to date.  If the current year or any prior years have not been filed, information is obtained from the State of Ohio filing report.  If it is established that the individual was a resident of Ashland a letter is then sent to the individual asking them to file all years that are delinquent.  Any correspondence after this point refers to page 11, (Due dates for correspondence).

 

BUSINESSES

Business accounts are found by the following methods:

1.  State of Ohio listing of new corporations.

2.  Building permits.

3.  Subcontractors from the back of the questionnaires sent in by contractors doing business      inside Ashland.

4.  City bid awards – Finance office

5.  Permits granted by Mayors office.

6.  1099’s sent to City tax office.

7.  Newspaper article.

8.  Signs in yards advertising while doing work inside corporation limits.

9.  New businesses call in to report themselves.

A questionnaire is then sent by the City of Ashland Tax office asking them to register with our office so an account can be set-up on our computer system.

If it is determined that they need to file a return for a current or previous year(s) a letter is sent by the City of Ashland Tax office asking them to file along with the requested return(s).  Any correspondence after this point refers to page 11, (Due dates for correspondence).  

 

Individuals/Sole Proprietorships        ORC  Sec. 718.01(A)(7)   January 1, 2004

The income required to be reported on Schedules C, E, and F.  There is no provision in ORC Sec. 718 prohibiting the taxation of non-employee compensation (1099MISC) or gambling winning (W-2G).


 

LOTTERY & GAMBLING TAX IMPLEMENTATION

Obtain annually a listing from the Ohio Lottery Commission, of the name and address of all individuals in our zip code area that have won lottery moneys.  Upon receipt of the listing, the following should be done:

Review the list to determine place of residence.

Place of residence will be determined at the time of cash in.

Anyone receiving lottery winnings will be sent a tax return to declare the winnings if they have not previously declared their winnings.  Each person receiving lottery winnings will be required to supply documentation issued by the Ohio Lottery Commission.

Lump sum payment will be taxed in full.  The 26-payment option will be taxed each year the recipient is a resident of Ashland.  Proof of residence will be required if individual moves out of Ashland during the payment period.

There will be no deduction allowed against any gambling winnings except for professional gamblers.                                                                    

IRS form W-2G or 1099 misc. will be accepted as documentation of winnings.


 

Ashland Income Tax
218 Luther Street
Ashland, Ohio 44805

 

Office Hours:
Monday - Friday
7:30am - 4:00pm
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