(A) Duty of withholding.
(1) Except as otherwise provided herein, it is the duty of each employer within or doing business within the village, who employs one or more persons whether as an employee, officer, or director or otherwise, to deduct each time any compensation is paid the tax of 1% from:
(a) The gross amount (less qualified cafeteria plans) of all salaries, wages, bonuses, incentive payments, fees, commissions or other forms of compensation paid to residents of the village, regardless of the place where the services are rendered; and
(b) All compensation paid non-residents for services in excess of 20 days rendered within the village. For the purposes of this subchapter, other compensation shall include the premiums paid by an employer for group term life insurance for protection in excess of the amount specified under provisions of Internal Revenue Code section 79.
(2) All employers within or doing business within the village are required to make the collections and deductions specified in this section, regardless of the fact that the services on account of which any particular deduction is required, as to residents of the village, were performed outside the village.
(3) Employers who do not maintain a permanent office or place of business of the village, but who are subject to tax on net profits attributable to the village, under the method of allocation provided for in
the Ordinance, are considered to be employers within the village and subject to the requirement of withholding (except small business owners with less than $500 of gross receipts need only to do so at their fixed locality municipality).
(4) 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 paid. If the employer has withheld the tax and failed to pay the tax withheld to the Administrator, the employee is not liable for the tax so withheld.
(5) Commissions and fees paid to professional men, brokers and others 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 a declaration and a return and pay the tax pursuant to the provisions of the Ordinance and §§ 171.054 and 171.056.
(6) Where a non-resident receives compensation for personal services rendered or performed partly within and partly without the village, the withholding employer shall deduct, withhold and remit the tax on that portion of the compensation which is earned within the village in accordance with the following rules of apportionment.
(a) If the non-resident is a salesman, agent or other employee whose compensation depends directly on the volume of business transacted or chiefly effected by him, the deducting and withholding shall attach to the portion of the entire compensation which the volume of business transacted or chiefly effected by the employee within the village bears to the total volume of business transacted by him within and outside the village.
(b) The deducting and withholding of personal service compensation of other non-resident employees, including officers of corporations, shall attach to the proportion of the personal service compensation of such employee which the total number of his working hours within the village is the total number of working hours.
(c) The fact that non-resident employees are subject to call at any time does not permit the allocation of pay for time worked within the village on a seven-day per week basis. Their percentage of time worked in the village will be computed on the basis of a 40-hour week unless the employer notifies the Administrator that a greater or lessor number of hours per week are worked.
(d) The occasional entry into the village of a non-resident employee who performs the duties, for which he is employed primarily outside the village, shall not be deemed to take such employee out of the class of those rendering their services entirely outside the village (20 day rule).
(7) An employer shall withhold the tax on the full amount of any advances made to an employee on account of commissions.
(8) An employer required to withhold the tax on compensation paid to an employee shall, in determining the amount of which the tax is to be withheld, ignore any amount allowed and paid to the employee for expenses 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 under § 171.052.
(9) An employer whose records show that an employee is a non-resident of the village and 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 village by such employee, provided, however, that such employer must withhold the tax on all personal service 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) A village employer required to withhold the tax from a the village resident for work done or services performed in another municipality, and who does so withhold and remit to such other municipality, shall be relieved from the requirement of withholding the village tax from such village resident, except where the rate of tax for such other municipality is less than the rate of tax imposed by this subchapter. In such case the employer shall withhold and remit the difference to this village.
(11) 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.
(B) Return and payment of tax withheld and status of employers.
(1) The deductions from salaries, wages, and other compensation required to be made by employers are to begin with the compensation earned on or after the effective date of the Ordinance.
(a) Taxes must be remitted monthly if the collected taxes exceeded $2,399 in the previous calendar year or if the collected taxes in any month during the previous calendar quarter exceeded $200. If these thresholds are not met then the tax must be remitted quarterly (last day of the following month).
(b) The return required to be filed under this subchapter shall be made on a form furnished by or obtainable from the Administrator.
(2) If more than the amount of tax required to be deducted by the Ordinance is withheld from an employee's pay, such excess may be refunded by the employer or the Administrator, depending on 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 period the employer shall make the necessary adjustment directly with the employee and the amount to be reported on the return as withheld shall be the corrected amount;
2. If the over-withholding is discovered in a subsequent period of the same calendar year the employer may make proper adjustment with the employee. In such case the return for the period in which the adjustment is made shall indicate the total amount actually withheld, the amount of the adjustment deducted there from, and the corrected amount reported on the return;
3. If the over-withholding is discovered in the following year, the employer should notify the Administrator of such over-withholding and the circumstances thereof. Upon proper verification the Administrator shall refund to the employee the amount such excess withholding.
(b) Former employees. In case too much has been withheld from an employee, 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 to the employee the amount of such excess withholding.
(c) Non-residents employed outside the village. Where an employer has withheld the tax from all wages of a non-resident of the village and such non-resident has been employed outside of the village for all or part of the time, such employee shall file a claim with the Administrator covering such erroneous withholding and the Administrator shall, upon verification thereof by the employer, refund to the employee the amount of such excess withholding.
(d) Insufficient withholding. If less than the amount of tax required to be deducted is withheld from an employee, such deficiency shall be withheld from subsequent wages. However, if the employee-employer relationship has terminated, the employer shall notify the Administrator of such deficiency and the reason therefore.
(3) Every employer is deemed to be a trustee for the village in collecting and holding the tax required under the Ordinance to be withheld and the funds so collected by such withholding are deemed to be trust funds.
(4) Every such employer required to deduct and withhold the tax at the source is liable directly to this village for payment of such tax whether actually collected from such employee or not.
(5) The officer or employee having control or supervision or charged with the responsibility of filing the return and making the payment, shall be personally liable for failure to file the return or pay the tax due as required herein.
(6) On or before January 31, following any calendar year in which such deductions have been made by any employer, such employer shall file with the Administrator, in the form prescribed by the Administrator, an information return for each employee from whom the village income tax has been withheld, showing the name, address and Social Security number of the employee, the total amount of compensation paid during the year and the amount of the village income tax withheld from such employee. Computer printouts are accepted (and preferred) in lieu of individual forms provided all data is present.
(7) The gross compensation to be reported for each employee shall be for the full 12 calendar months of the year or such portion thereof as the employee reported on was employed.
(8) All payments not subject to withholding shall be reported on forms as required by the Administrator (copies of Federal Form 1099MISC).
(9) In addition to such information returns, and at the time the same are filed, such employer shall file with the Administrator a form to enable the Administrator to reconcile the sum total of compensation paid and taxes withheld as disclosed by information return, W-2, or list of employees, and prior returns and remittances made pursuant to the Ordinance.
(10) Any money withheld from employees' wages by a non-profit organization on a voluntary basis for the purchase of "Tax Shelter Annuities" under the provisions of Internal Revenue Code Sec. 401 shall be considered as income for the determination of wages subject to the village income tax.
(11) Contributions by employees from their gross wages into employer or third party trusts or pension plans as permitted by any provisions of the Internal Revenue Code and which are excludable from gross wages for federal tax purposes are not excludable from gross wages subject the village tax.
(C) Fractional parts of cent. In deducting and withholding the tax at the source and in payment of any tax due under the Ordinance, a fractional part of a cent shall be disregarded unless it amounts to one-half cent (½¢) or more in which case it shall be increased to one cent (1¢).
(Ord. O-2015-28, passed 11-23-2015; Am. Ord. passed 9-9-2019)