(a) Payment with Annual Return.
(1) Amount due. The payment due at the time of filing the annual return shall be the amount of tax imposed by the Ordinance of the City of Lorain after deducting:
A. The amount of said tax withheld (deducted at the source) by an employer or employers pursuant to subsection (b) hereof entitled "Collection at the Source".
B. Credit for any tax paid or due another taxing Municipality in accordance with Section 191.08(a) and (b).
C. The amount of said tax paid on a Declaration of Estimated Income Tax by individuals, or in the case of businesses, a Declaration of Estimated Tax on net Profits in accordance with Section 191.06 entitled "Returns”, including any overpayments of previous years tax which have not been otherwise applied.
(2) Amounts less than one dollar. Payments less than one dollar ($1.00) should not be remitted and refunds of less than one dollar ($1.00) will not be refunded.
(3) Overpayment. Except as otherwise provided, should the return indicate an overpayment of tax to which this Municipality is entitled under the provisions of Section 191.10(b) entitled "Refunds", such overpayment shall be refunded or applied to the succeeding year's tax liability in accordance with Section 191.10(b).
(4) Where to make payments. Whenever the Ordinance or these Regulations require the filing of a return or the payment of a tax to the Administrator, or to this Municipality, such return and/or payment shall be made directly to The City of Lorain Income Tax Department.
(b) Collection at Source.
(1) Withholding. It is the duty of each employer within or doing business within the City of Lorain who employs one or more persons on a salary, wage, commission or other compensation elsewhere, to deduct each time such compensation is paid to an employee, subject to the Ordinance, the tax from any such compensation due by said employer to said employee. Except as otherwise provided, the tax shall be deducted by the employer from:
A. The gross amount of all salaries, bonuses, incentive payments, wages, commissions or other form of compensation paid to employees who are residents of the City of Lorain regardless of the place where the services are rendered.
B. All compensation paid to employees who are non-residents of this Municipality for services rendered, work performed or other activities engaged in to earn such compensation within this Municipality.
(2) Employer responsibility. All employers within or doing business within the City of Lorain are required to make the collections and deductions in this Section specified, regardless of the fact that the services on account of which any particular deduction is required as to residents of this Municipality were performed at a place of business of any such employer situated outside this Municipality.
(3) Employee responsibility. The mere fact that the tax is not withheld will not relieve the employee of the responsibility of filing a return and paying the tax on the compensation received (see subsection (c)(1) hereof).
(4) Individuals not subject to withholding. Commissions and fees paid to professional men, brokers and other who are independent contractors and not employees of the payor, are not subject to withholding or collection of the tax at the source. Such taxpayers must, in all instances, file returns and pay the tax pursuant to Section 191.07 entitled "Payment of Tax".
(5) Non-resident employee. In the case of employees who are non-residents of this Municipality, the amount to be deducted and withheld is two percent (2%) of the compensation paid with respect to personal services rendered in the City of Lorain. (Ord. 11-09. Passed 2-2-09.)
Where a non-resident receives compensation for personal services rendered or performed partly within and partly outside the City of Lorain, the withholding employer shall deduct, withhold and remit the tax on the portion of the compensation which is earned within this Municipality in accordance with the following rules of apportionment:
A. If the non-resident is a salesman, agent or other employee whose compensation on the basis of commissions depends directly on the volume of business transacted by him, the deducting and withholding shall attach to the portion of the entire compensation which the volume of business transacted by the employee within this Municipality bears to the volume of business transacted by him within and outside this Municipality.
B. The deducting and withholding of personal services compensation of all other employees (including officers of corporations) shall attach to the portion of the personal service compensation of such employee which the total number of working days employed within this Municipality bears to the total number of working days employed within and outside this Municipality.
C. If it is impossible to apportion the earnings as provided above because of:
1. The peculiar nature of the service of the employee, or
2. The unusual basis of compensation apportionment shall be made in accordance with the facts and the tax deducted and withheld accordingly. With respect to each such employee (or group of employees similarly or identically circumstanced), the employer shall furnish the Administrator with a detailed statement of facts.
D. The occasional entry into this Municipality of a non-resident employee who performs the regular duties for which he is employed almost entirely, or entirely, outside this Municipality, but also enters this Municipality for the purpose of reporting, receiving instructions, accounting, etc., incidental to his duties, shall not be deemed to take such employee out of the class of those rendering their services entirely outside this Municipality.
E. In apportioning the earnings of an employee, an employer may accept the written reports of his employee as to any of the items set forth in A., B., and C. above. However, the employer shall be responsible for any material error in an allocation as to employment within this municipality.
(6) Draws and advances. An employer shall withhold the tax on the full amount of any advances in the same manner as the employer withholds for federal purposes.
(7) Expenses. An employer required to withhold the tax on compensation paid to an employee shall, in determining the amount on which the tax is to be withheld, ignore any amount allowed and paid to the employee for expenses necessarily and actually incurred by the employee in the actual performance of his services, provided such expenses are incurred in earning compensation, including commissions, and are not deducted as a business expense by the employee (other than as an offset to an advance or reimbursement).
(8) Withholding on residents. Except as herein provided, an employer within or doing business within the City of Lorain is required to withhold the tax from the compensation paid to residents of this Municipality regardless of where the services compensated for were performed. Any employer who employs a resident of this Municipality, in another taxing municipality which employer is subject to the withholding provisions of both Ordinances, shall withhold and remit tax as follows:
A. Same Tax Rate. If the rate of tax levied by the other taxing Municipality is the same as imposed by this Ordinance, the employer shall withhold the tax on the entire wage earned by such resident of this municipality and shall remit to such other taxing municipality the appropriate amount of tax due that municipality on the wages earned by such resident of this municipality in such other taxing municipality, remitting to this Municipality only the balance, if any, of the tax withheld.
B. Lower Tax Rate. If the rate of tax levied by the other taxing municipality is less than the rate imposed by the Ordinance of this municipality, such employer shall withhold tax on the entire wage earned by such resident of this municipality and shall remit to the other taxing municipality only the tax imposed by the Ordinance of such other taxing municipality on the income earned therein by such resident of this municipality and shall remit to this municipality only the balance of the tax withheld.
C. Higher Tax Rate. If the rate of the tax levied by the other taxing municipality is at a higher rate than imposed by this Ordinance, such employer shall withhold and remit to such other taxing municipality, its full rate of tax on compensation earned therein by such resident of this municipality, remitting to this Municipality only the tax withheld on wages earned other than in such higher-rate taxing municipality.
D. General. The foregoing provisions are conditioned upon the employer's advising the respective cities in which the employer is subject to the withholding provisions of the amount of salaries, wages or compensations earned within such cities, such information to be incorporated in a form approved by the Administrator.
(9) Employee address records. An employer whose records show that an employee is a non-resident of this Municipality and who has no knowledge to the contrary, shall be relieved of the responsibility of withholding the tax on personal service compensation paid to such employee for services rendered or work done outside the City of Lorain by such employer provided, however, that such employer otherwise subject to withholding must withhold the tax on compensation paid such employee after the Administrator notifies said employer, in writing, that such employee is a resident of this Municipality. All employees are required to notify the employer of any change of residence and the date thereof.
(10) Domestic help. No person shall be required to withhold the tax on the wages or other compensation paid domestic servants employed exclusively in or about such person's residence, but such employee shall be subject to all of the requirements of the Ordinance.
(c) Collection at Source-Return and Payment of Tax Withheld and Status of Employers.
(1) Manager's obligation:
A. Every manager is deemed to be a trustee of this Municipality in collecting and holding the tax required under Ordinance to be withheld, and the funds so collected by such withholding are deemed to be trust funds.
Every manager is liable directly to the City of Lorain for payment of such trust, whether actually collected by such employer or not. Any tax deducted and withheld is to be considered paid to this Municipality, whether or not the employer actually remits the tax to this Municipality for purposes of determining employee payments or credits.
B. All managers shall be personally liable to the extent of the tax, interest and penalty, jointly and severally, for failure to file the employer's return or to pay the employer's tax, interest and penalty as required under this Ordinance.
C. No change in structure by an employer, including a fundamental change, discharges its managers from liability for the employees' or managers’ failure to remit funds held in trust, to file a tax return or to pay taxes.
(Ord. 152-94. Passed 12-19-94.)
(2) Dates and requirements. Any tax deductions from salaries, wages and other compensation required to be made by employers are to begin with compensation earned on and after the effective date of this Ordinance.
A. Such payment shall be made on an Employer’s Tax Withholding Statement (W-1) furnished by or obtainable upon request from the Administrator, setting forth the amount of tax deducted for the month. A copy of the Employer’s Tax Withholding Statement (W-1) will be retained by the employer for his records.
B. The employer (in addition to any return required to be filed with respect to its own earning or net profits) shall, on or before the fifteenth day of each month file a return (Employer’s Tax Withholding Statement W-1) and pay to the Administrator the amount of taxes so deducted or withheld with respect to compensation paid to all of its employees subject to the tax under this Ordinance during the previous month, except as provided in the following paragraphs:
1. If the amount of tax so deducted by an employer for this Municipality in any one month is less than two thousand dollars ($2,000), the employer may defer the filing of a return and payment of the amount deducted until the last day of the month following the end of the calendar quarter in which such month occurred.
2. The return (Employer’s Tax Withholding Statement, W-1) required to be filed under this section shall be made on the form furnished by or obtainable from the Administrator.
(Ord. 211-02. Passed 12-16-02.)
C. All tax so withheld and so required to be reported must be paid to the Administrator in full at the time of filing of such form.
(3) Over withholding. If more than the amount of tax required to be deducted by this Ordinance is withheld from an employee's pay, such excess may be refunded by the employer or the Administrator, depending upon the circumstances and the time when the over withholding is determined as follows:
A. Current Employees:
1. If the over-withholding is discovered in the same month, the employer shall make the necessary adjustment directly with the employee and the amount to be reported on the Employer's Tax Withholding Statement (W-1) as withheld shall be the corrected amount.
2. If the over-withholding is discovered in a subsequent month of the same calendar year, the employer may make proper adjustment with the employee. In such case, the Employer's Tax Withholding Statement (W-1) for the month or quarter in which the adjustment is made shall reflect the total amount actually withheld for the month and the amount of the adjustment deducted therefrom. Also, an amended Form W-1 must be filed for the month or quarter in which the error occurred reflecting the adjustment.
3. If the over withholding is discovered in a subsequent month of the following calendar year, the employee must make and file a request for a refund. This request is to be filed on a form prescribed by and obtainable from the Administrator.
B. Former Employees:
1. In the cases where an amount in excess of the tax has been withheld from an employee who is no longer employed by the employer, the Administrator shall refund the amount of such excess withholding to the employer.
2. If the error is discovered by the employee, such employee shall file a claim with the Administrator and upon verification thereof by the employer, the Administrator shall refund the amount of such excess withholding to the employee.
(4) Insufficient withholding. If less than the amount of tax required to be deducted is withheld from the employee and is discovered in the same year, such deficiency shall be withheld from subsequent wages. If the employee/employer relationship has been terminated, or if the under withholding is discovered in a later year and the employee/employer relationship still exists, the employer shall notify the Administrator of such deficiency and the reason therefor, and payment shall be made by the employer in conformity with subsection (b) hereof.
(5) Annual reconciliation. On or before January 31st following any calendar year in which such deductions have been made by an employer, such employer shall file with the Administrator, in the form prescribed by the Administrator, an information return for each employee from whom municipal income tax has been withheld showing the name, address and social security number of the employee, the total amount of taxable compensation paid during the year and the amount of municipal income tax withheld for this Municipality from each employee.
1099 Employees – All individuals, businesses, employers, brokers or others who are required under the Internal Revenue Code to furnish forms 1099 to the IRS for individuals or businesses to whom or which they have paid non-employee compensation, shall furnish copies of the said form 1099's to the Tax Administrator or in lieu thereof, a listing containing the same information as required by IRS on the 1099's on or before the due date for such form 1099's as established by the IRS.
(6) Reconciliation return. In addition to such information returns and at the time the same are filed, such employer shall file with the Administrator Form W-3 to enable the Administrator to reconcile the sum total of taxes withheld as disclosed by the total W-2 forms or lists of employees. The Form W-3 shall also reconcile to prior remittances and returns filed by the employer for such tax year with respect to taxes withheld.
(Ord. 152-94. Passed 12-19-94.)
(7) Types of reconciliation. The information return covered under subsection (c)(5) hereof shall be made in one of four ways at the election of each employer except as provided for by subsection (c)(7)E. hereof as follows:
A. Those employers using Form W-2 furnished commercially may submit a copy of such commercial W-2 providing the copy furnished to this Municipality clearly shows the information required in subsection (c)(5) hereof.
B. Those employers not using Form W-2 furnished commercially may obtain forms upon request from the Administrator.
C. Where the furnishing of this information as above indicated will create a distinct hardship, the employer, upon written request to the Administrator, may be permitted to furnish a list of all employees subject to the tax, which shall show the employee’s full name, last known address, social security number, gross amount of taxable compensation paid during the year and the amount of municipal income tax withheld for this Municipality.
D. Upon written request made to the Administrator on or before the due date set forward in subsection (c)(5) hereof in a format to be prescribed by the Administrator, the information included in subsection (c)(5) hereof may be submitted on computer listing paper. (Ord. 187-07. Passed 12-3-07.)
E. Employers of 50 or more employees shall use the MMREF-1 or EFW2 Magnetic Media Reporting and Electronic Filing format when filing W-2 information. (Ord. 178-11. Passed 11-21-11.)
(d) Dates of Payments of Estimated Tax.
(1) The estimated tax may be paid in full with the Declaration of Estimated Tax or in equal installments on or before the last day of the fourth, sixth, ninth and twelfth months of the taxable year.
(2) When filing a Declaration of Estimated Tax (Form LQ-1), the return must be accompanied by at least one-fourth of the estimated tax due thereon.
(3) In the event an Amended Declaration of Estimated Tax has been filed, the unpaid balance shown due thereon shall be paid in equal installments over the remaining payment dates.
(4) If the total estimated tax for the current year amounts to not more than one hundred dollars ($100.00), no payment of estimated tax is required.
(Ord. 152-94. Passed 12-19-94.)