(a) Withholding Required.
(1) An employer doing business or maintaining an establishment within the City shall withhold from each payment to the employer's employees on and after the effective date of this chapter the tax on their compensation subject to the tax, after giving effect to exemptions, as follows:
A. Residents.
1. At a rate equal to one percent of all compensation paid to the employee who is a resident of the City, if he or she is not subject to withholding in any other city levying the tax.
2. At a rate equal to one-half of one percent of all compensation paid to the employee. Who is a resident of the city from whom the employer is required to withhold on such compensation earned in another city.
B. Nonresidents. At a rate equal to one-half of one percent of the compensation paid to the employee for work done or services performed in the city designated by the employee as his or her predominant place of employment. The withholding rate shall be applied to the percentage of the employee's total compensation equal to the employee's estimated percentage of work done or services to be performed in the City for such employer, but no withholding shall be required if the estimated percentage of work is less than twenty-five percent.
(2) An employer withholding the tax is deemed to hold such tax as a trustee for the City.
(3) An employer who is required to withhold and who fails or refuses to deduct and withhold is liable for the payment of the amount required to be withheld. The liability shall be discharged upon payment of the tax by the employee but the employer is not relieved of penalties and interest provided in this chapter for such failure or refusal.
(4) In determining whether the tax shall be withheld from musicians, entertainers, athletes and other such individuals, the definition of "employee" in Section 880.02(b)(8) shall be controlling.
(5) An employer, whether or not an individual, and whether or not a resident of the City, who maintains a business establishment or business establishments in the City and a business establishment or business establishments outside the City must withhold the tax from all Ionia residents working at such employer's out-of-City establishment or establishments.
(6) Compensation subject to withholding shall include wage and salary advances, and advances on commissions.
(b) Payments or Persons Excepted From Withholding.
(1) Employers shall not withhold any tax from the following payments or persons:
A. Compensation paid to domestic help.
B. Compensation paid to a person who is not an employee, including an independent contractor.
C. An amount allowed and paid to an employee as reimbursement for expenses necessarily and actually incurred by the employee in the actual performance of his or her services, and that is deductible by the employer.
D. A qualified taxpayer as defined in Section 880.21(l)(3) A.
(2) An employer who directly makes wage continuation payments for personal injuries, sickness or disability may elect to withhold or not withhold the tax on the exempt portion of such payments. In either case the amount of exempt income shall be included in the total amount of compensation reported on the annual information return required of all employers under paragraph (k)(2) hereof, either as part of total wages paid or as a separate figure.
(c) Employee Responsibility and Liability re Withholding. If the tax is not withheld, an employee is not excused from filing a return and paying the tax on his or her compensation. If the tax is withheld but an employer fails to pay the tax to the City, the employee is not liable for the tax so withheld.
(d) Filing of Employee Form Required. An employee with compensation subject to tax shall file with his employer a form on which the employee states the number of exemptions claimed, the city of residence, the predominant place of employment, whether or not the employee claims status as a qualified taxpayer of a renaissance zone, and the percentage of work done or services performed in the predominant place of employment. The percentage shall be expressed as "less than twenty-five percent, forty percent, sixty percent, eighty percent or one hundred percent." The employer shall retain the form, rely on the information on the form for withholding purposes unless directed by the City to withhold on another basis, and, if the employee claims status as a qualified taxpayer based on residency in a renaissance zone, forward a copy of the form to the City. If information submitted by the employee is not believed to be true, correct and complete, the City shall be so advised As used in this section, "renaissance zone" means that term as defined in Section 880.21.
(e) Filing of Revised Form.
(1) Except as provided in paragraph (e)(2) hereof, an employee shall file with his or her employer a revised form within ten days after the number of exemptions decreases or when a change in residence from or to a taxing city occurs. The employee may file a revised form when his or her number of exemptions increases. An employee shall file a revised form by December 1 of each year if his or her predominant place of employment, estimate of the percentage of work done or services to be rendered in the City or status as a qualified taxpayer of a renaissance zone will change for the ensuing year. Revised withholding certificates shall not be given retroactive effect.
(2) An employee shall file a revised form with his or her employer within ten days after the employee completes the residency requirements under Section 880.21(l), and when a change of status occurs from resident of a renaissance zone to nonresident of a renaissance zone, the employer shall forward a copy of a revised form filed under this subsection to the City.
(f) Refusal of Employee to Furnish Withholding Certificate. If an employee refuses to furnish a withholding certificate upon the request of his or her employer, the employer shall withhold one percent of the employee's total compensation and report and pay the withholding on the basis of the best information in the possession of the employer.
(g) Withholding Tables; First Compensation.
(1) The City shall provide withholding tables establishing the amounts to be withheld for various tax rates, wage brackets, numbers of exemptions and pay periods. An employer who uses the tables fully discharges his or her duty to withhold. An employer may elect not to use the tables, in which case, to discharge fully his or her duty to withhold he or she shall withhold, the applicable percent of taxable compensation after provision for exemptions.
(2) The first compensation paid an employee on or after the effective date of the tax levy is subject to withholding on either of the following bases at the option of the employer:
A. On the full amount of compensation paid.
B. On the proportion of compensation paid for work done or services performed on or after the effective date of the levy.
(h) Overwithheld Tax; Refund. If an employer withholds more than the apparent tax liability of an employee due to an increase in the number of exemptions claimed during the year, due to the actual percentage of work performed in the City by a non-resident being less than the estimated percentage, due to a change of residence during the year to or from a taxing city or due to any reason other than the employer's error, the employer shall neither refund the excess to the employee nor offset the excess by under-withholding in a subsequent period. The employee shall claim his or her refund from the City on his or her annual return.
(i) Correction of Withholding Error. Correction of an over or an under-withholding as a result of employer's error shall be made as follows:
(1) If the error is discovered in the same quarter in which it is made, the employer shall make the necessary adjustment on a subsequent pay and include only the corrected amount on the quarterly return.
(2) If the error is discovered in a subsequent quarter of the same calendar year, the employer shall make the necessary adjustment on a subsequent pay and report it as an adjustment on the quarterly return.
(3) If the error is discovered in the following calendar year, or if the employer-employee relationship has terminated, the procedure shall be as follows:
A. The employee or former employee shall apply to the City for a refund in case of an over-withholding. Upon proper verification, the City shall refund to such employee or former employee the amount of the over-withholding.
B. If a deficiency is discovered, the employer shall notify the cites and the employee or former employee, who shall pay the City the additional tax due in his or her annual return.
(j) Filing of Return; Payment by Employer; Electronic Funds Transfer.
(1) Except as provided in paragraph (j)(2) hereof, an employer shall file a return, furnished by or obtainable on request from the City, and pay to the City the full amount of the tax withheld on or before the last day of the month following the close of each calendar quarter.
(2) For tax years after the 1996 tax year and for which a City has entered into an agreement pursuant to Section 9 of Chapter 1 of the Internal Revenue Code, an employer shall file a return and pay the tax withheld for each calendar month on or before the fifteenth day of the month following the close of each calendar month to the Department of Treasury by means of an electronic funds transfer method approved by the State Commissioner of Revenue.
(k) Employers' Reconciliation of Quarterly Returns; Deficiency and Refund; Information Return; Cessation of Business.
(1) An employer shall file with the City or the Department of Treasury a reconciliation of quarterly returns on or before the last day of February following each calendar year in which the employer has withheld from an employee's compensation. A deficiency is due when the reconciliation is filed. If the employer made quarterly payments in excess of the amount withheld from an employee's compensation, the City or the Department, upon proper verification, shall refund the excess to the employer.
(2) In addition to the reconciliation, the employer shall file with the City or the Department an information return for each employee from whom the City income tax has been withheld and each employee subject to withholding under this chapter, setting forth his or her name, address and Social Security number, the total amount of compensation paid him or her during the year, and the amount of City income tax withheld. The information return shall be on a copy of the Federal W-2 form or on a form furnished or approved by the City or the Department A copy of the information return shall be furnished to the employee.
(3) Except as provided in paragraph (k)(3) hereof, if an employer goes out of business or otherwise ceases to be an employer, reconciliation forms and the information return forms shall be filed with the City by the date the final withholding return and payment are due.
(4) For tax years after the 1996 tax year and for which the City has entered into an agreement pursuant to Section 9 of Chapter 1 of the Internal Revenue Code, if an employer goes out of business or otherwise ceases to be an employer, reconciliation forms and the information return forms shall be filed with the Department within thirty days after the employer goes out of business or ceases to be an employer.
(Ord. 360. Passed 12-11-93.)