Judge rules centralized municipal tax filings can move forward in Ohio – a victory for Ohio businesses. Employers can opt in by March 1 for 2018 benefits.
On Wednesday, February 21, 2018, Judge David E. Cain of the Franklin County Court of Common Pleas cleared the path for Ohio businesses to continue using a new, streamlined municipal tax filing system recommended by many Ohio tax professionals as well as the Ohio Society of CPAs.
In addition to rejecting the preliminary injunction request filed by some Ohio municipalities, Cain ruled the centralized collection provisions are constitutional and terminated the case. The decision means Ohio employers can continue registering to centrally file and pay municipal net profits taxes this year through the Ohio Business Gateway.
Calendar year-end employers have until Thursday, March 1, 2018 to register for centralized filing through the Ohio Department of Taxation (ODT) and save what ODT estimates could be up to $1.6 billion annually in combined municipal tax filing costs. The new system allows employers to file one single return and make one payment quarterly for all cities where they owe municipal net profit taxes. The Ohio Department of Taxation will then remit payments due to cities and villages monthly for businesses opting in to centralized filing, and handle all related administrative tasks for municipal net profit taxes.
It is no secret that filing and paying municipal taxes in Ohio can be a confusing and time-consuming task. In an effort to save businesses millions of dollars of tax compliance, the Ohio Department of Taxation is urging business taxpayers to sign-up for the new, streamlined tax filing service. Registration is now available online (www.tax.ohio.gov) for businesses to ‘opt-in’ for centralized filing and state administration of the municipal net profit tax for the 2018 tax year, and the deadline to do so is March 1, 2018 for calendar year filers.
For corporations and pass-through entities that are required to report in multiple municipalities—there are more than 500 in Ohio—the new option will likely not only save time, but also money by allowing businesses to file a single return, rather than one in each municipality.
The Department of Taxation is now able to process all of the centrally filed returns and distribute the appropriate tax payments to each of the municipalities. The state will also handle all administrative functions, from appeals to audits.
The ultimate goal of this effort is to reduce compliance costs for businesses, though it is also important to note that the new law will not reduce the amount of taxes businesses owe. This new process will simply allow for more efficiency and better economies of scale, and be less costly than going through third party administrators.
As CPAs and tax professionals, we can certainly attest to the financial burden that many businesses operating in multiple municipalities face simply to remain compliant. This reform allows businesses to choose whether to file only one municipal net profit tax return with the state or continue to file with each and every municipality in which they do business.
If you believe opting-in will be beneficial to your business from an efficiency and expense standpoint, you should register for the program no later than March 1 (or the first day of the third month of your fiscal year). When making the election, you will need to notify the Ohio tax commissioner and each of the municipalities in which you did business during the previous tax year.
Keep in mind that businesses that choose to opt-in will commit to the new process for a full year, with renewal automatic unless cancelled by the taxpayer. There will be no changes in quarterly estimates or tax return due dates due to this process change. Tax returns are due on the 15th day of the 4th month following the end of the taxpayer’s taxable year. You should note that the new system is not available for any other taxes administered by a municipality, such as employee withholding or individual income tax returns.
You should consult with a tax professional familiar with these issues to assist you in making the best decision for your business. To sign up or for more information, visit the Ohio Department of Taxation’s website at www.tax.ohio.gov or give them a call to request a paper form at 1-844-238-0403.
Tom Cooney and Crystal Faulkner are partners with MCM CPAs & Advisors, a CPA and advisory firm offering expert guidance and beyond the bottom line thinking for today’s public and private businesses large and small, not-for-profits, governmental entities and individuals. Crystal Faulkner serves on the OSCPA Executive Committee. For additional information, call 513-768-6796 or visit us online at www.mcmcpa.com.