(a) Duty of Withholding.
(1) Except as provided in the City Income Tax Ordinance or elsewhere in these Rules and Regulations, each employer within or doing business within the City who employs one or more individuals shall, without assessment or notice or demand, deduct at the time of each payment, from the qualifying salary, wage, commission or other compensation earned, allocated, received, set aside or paid residents of the City regardless of where the services were rendered, and for nonresidents who performed work or services or other income producing activities in the City, the amount of tax due at the rate as provided in the Income Tax Ordinance. Federal deferred income plans and tax sheltered annuity plans, while they may not be applicable to federal withholding, are not recognized for City purposes; the full amount of gross wages shall be withheld upon for City income tax purposes. Contributions by an employee from his or her current earnings to any retirement or annuity plan or the like do not act to reduce such employee's income for City tax or withholding purposes.
(2) All employers within or doing business within the City are required to make the collections and deductions specified in this section from the gross income of all City residents regardless of the fact that all or part of the services performed by such residents of City may be performed outside the City.
(3) The place where payroll is prepared, even though it may be outside the City, has no bearing on the duty of an employer to deduct and remit the proper City income tax.
(4) Employers who do not maintain a permanent office or place of business in the City, but who are subject to tax on net profits attributable to the City, are considered to be employers within the City and subject to City withholding requirements.
(5) Commissions and fees paid to independent contractors are not subject to withholding or collection of the tax at the source. Taxpayers receiving such commissions and fees, in all instances, must file a declaration and return and must pay the tax per the Income Tax Ordinance. It is the responsibility of any entity or individual to provide copies to the City of Federal Form 1099 or such other form used to report commissions, fees or other compensation paid to non-employees. Such Forms 1099 or other reporting forms shall be due on or before February 28 of each year and shall include a calculation of the total compensation earned in the City by all recipients of said compensation during the preceding year.
(6) Where a nonresident receives compensation for personal services rendered or performed partly inside and partly outside the City, the employer shall, without assessment or notice or demand, withhold and remit the tax on that portion of the compensation which is earned within the City. The employer shall comply with the following rules of apportionment when making a determination as to amount to withhold:
A. If the nonresident is a salesperson, agent or other employee whose compensation depends directly on the volume of business transacted or chiefly effected by the employee, 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 bears to the total volume of business conducted by said employee.
B. The deducting and withholding from the compensation of other nonresident employees, including officers of corporations, shall attach to the proportion of the compensation of such employee which the total number of working hours within the City is of the total working hours.
C. The fact that nonresident employees are subject to call at any time does not permit the allocation of pay for the time worked within the City on a seven-day per week basis. The percentage of time worked in the City will be calculated on the basis of a 40-hour week unless the employer notifies and documents with the Superintendent that a greater or lesser number of hours is worked. The determination of tax liability of nonresidents working in and out of the City is to be computed on the formula of the total number of days worked in the City divided by the total number of days worked during the year and the resulting percentage applied to the total annual income from wages including sick leave, vacation, wage continuation plans and the like. A working day is any day for which compensation is received whether or not services were performed that day. Where no record can be substantiated of the number of days worked during the year, the figure 260 is to be used as the total number of days worked.
D. Wage continuation plans paid by the employer or third party agent on behalf of the employer for the purpose of health, rest, recuperation or other reward are deemed to have the same tax situs as the primary job assignment or job location of the employee and are taxable on the same ratio as the normal earnings of such employee.
E. An employee's attendance of meetings, training sessions, seminars and the like do not constitute changes in tax situs and are not factors in determining time in or out of the City.
F. The occasional entry into the City by a nonresident employee who performs the duties for which he or she is employed primarily outside the City but who enters the City for less than 12 days during any calendar year, shall not be deemed to take such employee out of the class of those rendering their services entirely outside the City. For the purposes of the 12-day calculation, "day" means any part of a 24-hour calendar day.
G. The Superintendent of Taxation shall, upon review of all circumstances, make a determination as to the taxable status of the employee and the duty of the employer to withhold the tax.
(7) Where an employee is given advances against future wages, commissions or other compensation, withholding shall be on the full amount advanced.
(8) Bonuses paid to employees as well as prizes and gifts to employees from their employers are subject to the City income tax and the employer shall withhold the tax at the time of payment. Such tax shall be remitted in the return for that period in the same manner as for any other compensation.
(9) Employers shall withhold and remit the tax on the full amount of qualifying wages, salaries, commissions and other compensation paid to employees regardless of the fact that an employee may have allowable expenses in connection with such compensation. Such expenses may, when certain criteria is met and if properly substantiated, be allowed as a reduction of the employee's taxable income at the time the employee files his or her annual City income tax return.
(10) Contributions by an employee from his or her earnings to any retirement or annuity plan or the like, do not act to reduce such employee's income for City income tax purposes, even though such contributions may be treated as a tax deferment for federal income tax purposes. For City purposes, the employer shall withhold on the full amount of qualifying wages, salaries, commissions and other compensation.
(11) No person shall be required to withhold the tax on the wages or other compensation paid to domestic servants employed exclusively in or about such person's residence. However, such employee shall be subject to all other aspects of the Income Tax Ordinance and these Rules and Regulations.
(12) A City employer required to withhold the tax from a City resident for work done or services performed in another municipality shall be relieved from the requirement of withholding the City tax from such City resident except where the rate of tax of the other municipality is less than the rate imposed by the City Income Tax Ordinance. In such case, the employer shall withhold and remit to the City the difference between the amount due to the other municipality and the amount that would otherwise be due to the City.
(13) The mere fact that the tax is not withheld will not relieve the employee of the responsibility of filing a return and paying the proper amount of tax due.
(14) The officer or employee having control or supervision of or charged with the responsibility of filing the return and making payment is personally liable for failure to file the City return or pay the City tax due as required. The officer or employee shall be personally liable for the tax he or she failed to return or pay as well as any related interest, penalties or fees. The dissolution of a corporation does not discharge an officer's or employee's liability for a prior failure of the corporation to file City returns or pay City tax due.
(b) Return and Payment of Tax Withheld and Status of Employers.
(1) Every employer required to withhold City income tax from the salaries, wages and other compensation shall, on of before the last day of each month, make a return and pay the tax withheld during the preceding calendar month. However, the Superintendent of Taxation shall have the authority to approve the filing of returns and payment of the tax on a quarterly basis when deemed to be in the best interest of the City.
A. An employer who wishes to file and remit quarterly may request the authority for quarterly filing from the Superintendent. Such request must be in writing, stating the name and City withholding account number of the employer, the address to which withholding forms should be mailed, the estimated amount of tax to be withheld each quarter, and the name, title and address of the person or persons responsible for complying with City withholding requirements. In considering such a request, the Superintendent will base the decision on the facts and the best interests of the City. The best interest of the City will be the primary deciding factor. Once approval is granted for quarterly filing and payment, the employer may continue on such basis unless notified by the Superintendent that quarterly filing is withdrawn. The Superintendent shall withdraw the quarterly filing authorization whenever it is deemed that such quarterly authorization is no longer in the City's best interest.
B. Notice of withdrawal of quarterly filing authorization shall be made in writing and may be served in person or mailed to the address where withholding returns are mailed. Proof of mailing furnished by the United States Post Office shall be presumptive proof of receipt.
C. Employers authorized to file and pay on a quarterly basis shall, on or before the last day of each month following the calendar quarter ending March 31, June 30, September 30 and December 31, make a return and pay the tax withheld during the preceding calendar quarter.
(2) Every employer is deemed to be a trustee for the City in collecting and holding the tax required per the Income Tax Ordinance to be withheld and all funds so collected by such withholding are deemed to be trust funds.
(3) Every employer required to deduct and withhold the City income tax at the source is liable directly to the City for payment of such tax whether the tax was actually collected or withheld from the employee or not.
(4) Every employer required to withhold City income tax shall file, no later than February 28 of each year, an annual reconciliation covering the aggregate amount deducted and remitted during the entire preceding calendar year. The employer shall file with the Superintendent, in a form prescribed by the Superintendent, an information return for each employee from whom the City income tax has been withheld, clearly showing the name, address and social security number of the employee, the total amount of compensation paid during the year and the amount of City income tax withheld from such employee. The information return may be a copy of Federal Form W-2 or other listing as approved by the Superintendent and containing the required information.
(5) If more than the amount of tax required to be deducted by the employer is withheld from the employee's pay, such excess may be refunded by the employer or the City depending upon the circumstances and the time the over-withholding is determined, as follows:
A. Current employees:
1. If the over-withholding is discovered in the same withholding period, the employer shall make the necessary adjustment directly with the employee and the amount to be reported 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 report for the period in which the adjustment is made shall indicate the total amount actually withheld, the amount of the adjustment deducted therefrom, and the corrected amount reported.
3. If the over-withholding is discovered in the following year, the employer should notify the Superintendent of such over-withholding and the circumstances thereof. Upon proper verification, the Superintendent shall refund to the employee the amount of such excess withholding.
B. Former employees:
1. If over-withholding is discovered from an employee who is no longer employed by the employer, the employer shall notify the Superintendent and provide verification of the amount and circumstances of such over- withholding and the Superintendent shall then refund to the employee the amount of such excess withholding.
2. If the error is discovered by the employee, such employee shall file a claim with the Superintendent and, upon certification by the employer, the Superintendent shall refund to the employee the amount of such excess withholding.
(6) Where an employer has withheld the tax from all wages of a nonresident of the City and such nonresident has been employed outside the City for all or a part of the time, such employee shall file a claim with the Superintendent covering such withholding and the Superintendent shall, upon verification by the employer, refund to the employee the amount of any excess withholding.
(7) If less than the amount of tax required to be deducted is withheld from an employee, such deficiency shall be withheld from subsequent wages. If the employee- employer relationship has terminated, the employer shall, immediately upon discovery, notify the Superintendent of such deficiency and the reasons and circumstances involved.
(8) In deducting and withholding the tax at the source and payment of any tax due, a fractional part of a cent shall be disregarded unless it amounts to one-half cent ($.005) or more, in which case, it shall be increased to one cent ($.01). No person shall be entitled to a refund nor additional payment merely because such rounding of the tax resulted in an apparent over or under payment.
(9) Employers desiring to make withholding filings and remittances by electronic funds transfer may do so beginning in 2003. Effective January 1, 2004, such electronic funds transfer shall be mandatory for those employers required to make remittances on a monthly basis and by those employers who use a payroll service, an outside contractor or other third-party service or entity to process their withholding. Effective January 1, 2008, it shall become mandatory for all employers required to withhold and remit the tax to make such filings and remittances by electronic funds transfer. Electronic funds transfers must be made in a format that is compatible with systems in use by the City and such format must be approved by the Tax Superintendent.
(Ord. 67-28. Passed 12-4-67; Res. 90-R-29. Passed 10-1-90; Ord. 02-24. Passed 12-23-02.)