Ohio’s tax burden is similar to those levied by its neighboring states, at least when it comes to payroll taxes. While neighbors like Michigan, Kentucky, and Indiana charge a flat income tax rate, Ohio’s graduated tax maxes out at 3.75%. This is lower than Michigan’s 4.05% flat rate and Kentucky’s 4.5% rate.
But most of all, managing payroll in Ohio is the same as it is in most other states. In this post, we’ll outline everything you need to know about paying employees in Ohio.
Ohio Payroll Tax Overview
In this section, we’ll cover the essentials a payroll manager in Ohio needs to know for state tax purposes.
Here’s a snapshot of Ohio’s payroll taxes and other labor rules:
- State Income Tax: Ohio’s graduated tax rate starts with earners who make $26,051 a year or more. If employees make less, they don’t need to pay state income tax. The rates for tax years beginning in 2023 are $360.69 + 2.75% of excess over $26,050 for income between $26,051-$100,000; $2,394.32 + 3.688% of excess over $100,000 for income between $100,000-$115,300; and $2,958.58 + 3.750% of excess over $115,300 for income over $115,300.
- Regional Income Tax Agency (RITA) Taxes: This agency manages all the local income taxes in Ohio. Hundreds of municipalities (cities) in the state levy their own income tax, and RITA collects them on behalf of many of these cities.
- Minimum Wage: The state minimum wage is $10.45 an hour for non-tipped employees.
- State Unemployment Insurance (SUI) Tax: For the 2023 tax year, the rates range from 0.3% to 12.9% on a taxable wage base of $9,000. The 2024 tax year shows rates ranging from 0.4% to 13.3% on the same taxable wage base.
- Workers’ Compensation: All employers with one or more employees must carry workers’ compensation insurance.
- Meal Breaks and Paid Leave: Unlike its neighbor to the south—Kentucky—Ohio does not have any laws requiring meal breaks. There are no laws requiring paid leave, either. The state defaults to the Family and Medical Leave (FMLA) and Fair Labor Standards Act (FLSA) guidelines for eligible employees.
Remember that we’re only talking about state and local taxes here—not federal ones. You can learn more about those in our guide to all the federal payroll forms. Employers should also familiarize themselves with the federal labor and leave laws outlined in the FLSA and FMLA.
Calculating RITA Taxes in Ohio
Ohio’s RITA taxes aren’t unique—plenty of states allow local and regional governments to charge taxes. But the agency itself is unique.
Here’s a quick rundown of what RITA is.
Ohio’s Regional Income Tax Agency (RITA) was formed in 1971 to manage income tax laws for Ohio municipalities that join the agency through the Regional Council of Governments (RCOG). The RCOG is an organization that lets different cities and villages work together to collect and enforce taxes.
When an RCOG member joins RITA, it gets to pass the burden of tax management on to the agency. RITA processes participating members’ municipal taxes according to the relevant laws. It mails things like tax filing reminders and delinquent notices to taxpayers. While not every Ohio city is an RCOG member, about 400 are, and they use RITA to manage their tax requirements.
You can check the list of participating municipalities to see if your employees are subject to RITA taxes.
Here’s the catch: Employees must pay RITA taxes based on where they work and where they live.
Ohio’s Local Tax System: A Snapshot
Ohio’s local tax system allows two types of local tax:
- Taxation of non-residents who earn income in a municipality (their work city)
- Taxation of residents who live in a municipality (their resident city)
As an employer, you must withhold RITA or city-specific taxes based on where your employees earn their income. You don’t have to worry about resident city income tax, though. Your employees will deal with that when it’s time to file their yearly return with their home city.
This is because most municipalities offer tax credits to prevent double taxation. When you look at a municipality’s tax rate, you’ll see something called a Credit Factor (Tax Credit) right next to it. The number will be a percentage. This represents the amount of income tax paid to the work city that can be credited against the tax owed to the resident city.
Next to the Credit Factor (Tax Credit) number, you’ll also see a Credit Rate (Credit Limit) expressed in percentage form. This number represents the tax rate at which the income tax paid to the work city can be credited against the income tax owed to the resident city.
For instance, if you click on Boston Heights, you’ll see a current tax rate of 2% with a Credit Factor (Tax Credit) of 100% and a Credit Rate (Credit Limit) of 2%.
Let’s break down what this means.
A Quick Breakdown of RITA Tax Definitions
- Current Tax Rate of 2%: This refers to the local income tax rate imposed by the employee’s municipality of residence or work. If someone lives in Cleveland but works in Boston Heights, then Boston Heights is the work city. If the person lives in Boston Heights but works in Cleveland, Boston Heights is the resident city.
- Credit Factor (Tax Credit) of 100%: This is the credit for taxes paid to the municipality where the employee works. For Boston Heights, the credit is equal to 100% of those taxes. So, if employees pay income tax at a rate of 2% to their work city, their resident city will give them a credit for the full amount of tax paid there. This basically means they don’t have to pay that 2% to their resident city if they already paid at least 2% in taxes to their work city.
- Credit Rate (Credit Limit) of 2%: This is the maximum rate at which tax credits are applied. It will always match the current tax rate of the municipality in question. So, in Boston Heights, the Credit Rate (Credit Limit) is 2%. This means employees who live in Boston Heights can receive a tax credit for taxes paid to their work city up to a 2% rate. If the work city has a higher tax rate than 2%, they would still only receive a credit equal to a 2% tax rate against their resident city’s taxes. So if their resident city charges 3% in taxes and they pay 2% to your work city, they’ll still owe 1% to their resident city.
It’s an incredibly confusing system. The good news is that most of the time, tax credits apply even if a person lives in a RITA city and works in a non-RITA city. The state’s goal is to reduce that double taxation as much as possible.
How to Pay RITA Taxes
Businesses whose employees work in RITA municipalities can sign up for RITA MyAccount. This online portal lets you do everything from electronically filing tax withholdings to making online payments.
Keep in mind that many of Ohio’s larger cities, like Cincinnati and Cleveland, are not part of RITA. But the suburbs around these bigger cities just might be. As one example, Cleveland proper isn’t a part of RITA, but the Cleveland Heights suburb is. The City of Cleveland has its own taxation agency—the Central Collection Agency (CCA).
Use this county map from RITA to double-check whether your employees live in a RITA or city-run tax area. As with state taxes, employers must withhold the correct amount of local income tax from each paycheck and send the money to RITA. And you have to do this according to the tax schedule and rules set by each municipality.
So, for the tax schedule in Cleveland Heights, you’d check the municipality’s page on RITA. You can find all the information you need under the Special Notes and Tax Documents section.
The same goes for your employees who live in non-RITA cities. You’ll need to collect and remit tax payments to whatever agency collects taxes in non-RITA cities like Cleveland, Toledo, and Cincinnati.
Filing Ohio Payroll Tax and Wage Reports
Employers must submit wage reports to the Ohio Department of Job and Family Services (ODJFS). All withheld payroll taxes go to the Ohio Department of Taxation.
Here’s a rundown of how, where, and when to file these documents.
How to file:
- For Payroll Taxes: You must register your business with the Ohio Department of Taxation to receive a tax account number. You can do this online through the Ohio Business Gateway. Once registered, you can file and remit payroll taxes online.
- For Wage Reports: Employers must submit quarterly wage reports to the ODJFS. These reports show the wages you’ve paid to employees. They help the state calculate your unemployment insurance responsibilities. You can submit wage reports online through the Ohio Business Gateway.
The Department of Taxation’s Business Services resource page can help you get started on taxes. For help on wage reports, see the Department of Job and Family Services’s information page on filing quarterly reports.
As for when you need to file taxes and reports by, it depends on a couple different things. Here’s a general guide:
- Payroll Taxes: The deadlines for filing and paying Ohio payroll taxes depend on your state-assigned filing frequency. You’ll know your filing frequency once you register your business with the Ohio Department of Taxation. It’ll be either monthly, semi-monthly, quarterly, or annually. Generally, monthly filers have to submit their taxes by the 15th day of the following month.
- Wage Reports: You must file quarterly wage reports with the ODJFS by the last day of the month after the end of a quarter. For Quarter 1, that’s April 30. For Quarter 2, it’s July 31. It’s October 31 for Quarter 3 and January 31 for Quarter 4.
Ohio Paycheck Laws
Ohio paycheck laws set specific requirements for how and when employees must be paid. They cover four areas: final paychecks, pay frequency, deductions, and pay stub requirements.
Let’s take a closer look at each one:
- Final Paycheck: In Ohio, there’s no law specifically addressing final paychecks. But in Title 41, Section 4113.15 of Ohio Revised Code, the law explicitly condemns late payments of any kind. Employers who pay anyone late are subject to fines and legal action.
- Pay Frequency: Ohio law says employers must pay their employees on the first and fifteenth days of the month. You can pay more frequently than that, but not less. AKA, monthly paychecks are a no-go.
- Deductions: Ohio only allows legally mandated deductions or voluntary deductions the employee agrees upon in writing. Legally mandated deductions include taxes, child support orders, and garnishments. Voluntary deductions are retirement plan contributions and health insurance premiums. Employers can’t deduct things like uniforms, tools, and cash register shortages. Well, you can, but only if the employee authorizes it in writing and the deductions don’t reduce their earnings below the minimum wage. You also have to get approval from the public authority.
- Pay Stub Requirements: Ohio law does not require that employers provide employees with a pay stub each pay period. However, a bill to require pay stubs is making its way through the state legislature. It’s always a best practice to go ahead and provide a pay stub each pay period whether it’s required or not. We can show you how.
One more big rule you should know: all Ohio employers with one or more employees must keep careful payroll records. You must keep each employee’s payroll record on file for at least five years after the date of any paycheck.
And if you’re wondering whether Ohio has any paid time off (PTO) payout laws, it doesn’t. (Unless you’re a state employer.) You don’t have to provide PTO at all. However, if you include a PTO payout policy in your employee handbook, contract, or agreement, you do have to follow it.
New Hire Reporting for Ohio Payroll
As in the rest of the United States, Ohio employers must report new hires and independent contractors. In the Buckeye State, you must do this within 20 days of the hire date. To report new hires, head over to the Ohio New Hire Reporting Center. You’ll need some basic information on hand before you can begin:
- The employee or contractor’s full name, address, and FEIN or SSN
- The employee or contractor’s date of hire and date of birth
- The employer’s name, FEIN, address, and mailing address
Forgetting to report new hires can lead to hefty fines and other legal issues, so make it a point to report new hires right away. Or…you can do payroll the easy way.
How Payroll Software Can Help
As you can tell, payroll in Ohio is no joke. There’s a lot to keep track of, and falling behind or getting lost in the information is all too easy.
That’s why we recommend using payroll software to do everything for you. Our favorite payroll software providers can keep track of all the laws, automate tax payments and wage reports, and a whole lot more.
Yes, you’ll have to pay to use one of them. But they come in a range of different plan structures. And besides, the price of software is nothing compared to a fee slapped on you by the State of Ohio.
Services like Gusto and OnPay help you stay compliant and let you focus on what you love most: running your business.
