How to Do Payroll in Ohio

The Ohio state government has decided to stop accepting tax returns on paper and use an electronic system instead. The move is designed to save taxpayers money by eliminating the need for printing, postage and collection of old forms. How much more are people expected to save? We answer that question here!

The “how to prepare payroll” is a guide that will help you prepare your payroll. It also includes information on how to calculate the amount of taxes and deductions.

Because it has so few laws on wages, time off, and breaks, Ohio is one of the simplest states for firms to operate in. However, since it contains school district income taxes, its income taxes are more complicated. We’ll go through the fundamentals of payroll in Ohio in the sections below.

Payroll software that also handles tax filing may simplify things and keep you compliant. Gusto is a restaurant that we suggest. It pays workers by cheque or direct deposit and keeps track of all 50 states’ payroll and tax requirements. Find out more about Gusto to determine whether it’s the best fit for you.

Gusto is a great place to visit.

Payroll Processing in Ohio: Step-by-Step Instructions

Step 1: Register your company as an employer. You’ll need your employer identification number (EIN) and an account with the Electronic Federal Tax Payment System (EFTPS) to file at the federal level (EFTPS).

Step 2: File a registration form with the state of Ohio. You’ll need to create an account with the Ohio Business Gateway online, where you’ll be able to file and pay withholdings. You may also fill out a paper form, but it will take weeks to complete. To pay State Unemployment Tax Act (SUTA) taxes, you must also register with the Department of Job and Family Services and the Employer Resource Information Center (ERIC).

Step 3: Create a payroll system. There are minimal restrictions in Ohio regarding paid time off and breaks, however there are overtime regulations. This isn’t where you start running payroll; rather, it’s where you start the process of setting it up. There are many methods for calculating payroll, and you must choose the one that is ideal for your company. Payroll software, a calculator, or even Excel may be used.

Collect employee payroll paperwork in step four. This is easier to do throughout the onboarding process. W-4, I-9, and Direct Deposit information are among the forms. You’ll need the IT 4 in Ohio (employee withholding exemption certificate).

Collect, evaluate, and approve time sheets in step 5. You may utilize a paper time sheet or sign up for time and attendance software that is either free or inexpensive.

Step 6: Work out your payroll and pay your staff. You may compute payroll and pay your workers using software, your own excel spreadsheet system, or a payroll calculator now that you’ve completed Step 3.

Step 7: File payroll taxes with the federal government and the state of Ohio. For federal taxes, including unemployment, follow the IRS’s guidelines.

Withholdings are reported on the Ohio IT 501 tax form. You may pay using the Ohio Business Gateway or the Ohio Treasurer of State’s electronic money transfer system. You only need to file for the quarters in which taxes were withheld. The amount of income and school district taxes withheld in a 12-month period ending June 30 determines how frequently you must file.

SUTA: If you don’t have any workers and haven’t paid any SUTA, you may file by phone at 1-866-44-UC-TAX. Otherwise, the Quarterly Wage Reporting Tool may be downloaded from the ERIC website, filled out offline, and then uploaded. The following dates are when payments are due:

If a report or tax payment is due on a Saturday or Sunday, the report or payment is deemed timely if it is received on or before the next working day.

Step 8: Keep track of your payroll data. Employee records must be kept for at least four years in Ohio. More information about keeping payroll records may be found in this article.

Step 9: Complete your year-end payroll tax returns. Send the W-2 (for workers) and 1099 (for non-employees) federal forms (for contractors). You must also provide the IT3 Transmittal of Wage and Tax Statements, as well as any tax reconciliation documents, such as the IT 942.

In this tutorial on how to conduct payroll, you may learn more about how to do payroll yourself. You can also obtain a free checklist to ensure you don’t miss any tasks.

Payroll Taxes, Laws, and Regulations in Ohio

You should obey federal law for income taxes, Social Security, Medicare, and Federal Unemployment Tax Act (FUTA) taxes, just as you would in any other state. Please keep in mind that you’ll have to deduct 6.2 percent of each employee’s earnings for Social Security and 1.45 percent for Medicare, plus pay a matching sum. Employees are responsible for paying income taxes, which vary. It is your obligation to take care of FUTA. Learn more about taxes, FICA, and FUTA in this article. The Ohio-specific factors are listed below.

Taxes in Ohio

Taxes in Ohio are a little more complex than in many states. In addition to the state income tax, there are school district taxes you must calculate withholdings for. In addition, there are Agreements of Reciprocity that affect workers that live in neighboring states.

Income Taxes in Different States

Ohio has income tax rates ranging from 0% to 4.79 percent, with charges beginning at $22,151 in income. The amount of exemptions is determined by the Ohio IT 4. Depending on whether you wish to withhold by percentage, weekly, biweekly, or monthly, Ohio provides numerous withholding tables. These may be found on the website of the Ohio Department of Taxation.

In terms of salary and eligible workers, Ohio follows federal law. Employees in the following categories are exempt:

Those who are excluded under federal law, such as farm and domestic employees
Individuals with a quarterly income of less than $300
Persons under the age of 18 who distribute newspapers or shopping news
Civilian wives of military personnel who live in the same state as the military member but do not live in Ohio

When withholdings are payable in Ohio, there is a complicated timetable. Failure to file carries a fee of $50 or 5% each month, and failure to pay carries a fine of 10% of the delayed payment per month. Withholdings that are not remitted are subject to a penalty of 50% of the late payment plus twice the interest.

Agreements of Reciprocity

Reciprocity agreements exist between Ohio and Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia. If you have workers who reside in another state but work in Ohio, they will be responsible for their own state’s income taxes.

Income Taxes in Your Community

Income taxes are levied by several local school districts. You must also withhold income taxes for that school district if an employee resides in that region. On the Ohio Department of Taxation’s website, you may locate school district tax rates. This paper contains the tariffs for 2021, however they fluctuate from year to year.

Unemployment Benefits

In the News: Ohio is launching a new Unemployment Benefits system, SOURCE (State of Ohio Unemployment Resource for Claimants and Employers). It gives employers and employees more autonomy in managing taxes and benefits and getting UI information. Employers are expected to start using it in 2021. Learn more on the Ohio Department of Job and Family Services Website.

Ohio assesses SUTA on a $9,000 taxable pay basis. “All money, the value of food and lodging, or other goods and services offered to an employee as payment for personal services” is how it defines wages.

For experienced companies, SUTA rates range from 0.3 percent to 9.3 percent. Unless they are in construction, which is 5.8%, new employers are taxed 2.7 percent. By December 1, the state will notify you your contribution rates for the upcoming calendar year.

In the following situations, you must pay SUTA:

You hired one or more persons in Ohio on any given day throughout any of the year’s 20 or more calendar weeks.
In a quarter, your yearly gross wage payroll equals or surpasses $1,500.
During any quarter of the current or preceding calendar year, you hired agricultural employees and paid them $20,000 or more in cash.
You are a federally exempt nonprofit organization that employs more than four persons on any given day throughout each of the 20 or more calendar weeks of a calendar year.
In any quarter of the current or previous calendar year, you hired domestic employees and paid $1,000 or more in cash for domestic services.

Finally, you must pay SUTA on everyone with whom you have an employer-employee connection.

Insurance for Workers’ Compensation

You must have Insurance for Workers’ Compensation if you have at least one employee. Ohio provides Insurance for Workers’ Compensation through the Bureau of Workers’ Compensation. There are multiple plans depending on the type of business and who you are covering, from mine operators to emergency service volunteers. Rates are set by an industrywide classification and the employer’s work experience. It costs $120 to apply, after which, your employees are covered. You may also elect to self-insure.

Ohio’s Minimum Wage Laws

If your company’s annual revenue exceeds $323,000, you must pay Ohio’s minimum wage. If your earnings are less than that, you may be able to pay your workers the federal minimum wage.

The minimum wage in Ohio is $8.80 per hour. Employees who are tipped must be paid at least the minimum wage of $4.40 per hour plus tips. Employees under the age of 20 may be paid a training pay of $4.25 per hour for the first 90 days of employment, and full-time high school or college students can be paid 85 percent of the minimum wage for up to 20 hours of work per week at specified companies, such as work-study programs.

There are a few exceptions:

Babysitters
Agricultural employees in particular
Salesperson who works on the street
Members of the family
Employees of motor transport businesses in particular
Under specific circumstances, baseball players in lower leagues
Under specific circumstances, camp workers

Overtime Regulations in Ohio

Employers who earn more than $150,000 a year are subject to overtime regulations. If an employee works more than 40 hours in a workweek, you must pay them at least time-and-a-half overtime compensation, as required by federal and state law. There are a few exceptions:

Agricultural employees
Employees that make more than $107,432 per year are classified as executive, administrative, and professional.
Some developmentally handicapped people, for whom full pay may jeopardize their capacity to find work
Babysitters or live-in companions for ill, recuperating, or elderly people
Under specific circumstances, camp workers
Members of the family
Persons who distribute newspapers
Salesperson who works on the streets
Operators of motor vehicles

Employees Can Be Paid in a Variety of Ways

There are no regulations in Ohio that govern how you pay your staff. Keep in mind that 7.1 million individuals in the United States do not have a bank account, so direct deposit isn’t an option for them. Checks or credit cards are viable solutions in these situations. Some payroll systems, such as Gusto’s Gusto Wallet, even provide specific accounts. In this post on employee compensation, we go through the various alternatives.

Pay Stub Regulations

Ohio does not have any Pay Stub Regulations, but you must keep payroll records for each employee for four years and include

Name, residence, and job title
Pay scales
Amount paid at the end of each pay period
Working hours per day and week

You may use one of our free pay stub templates if your program does not generate pay stubs.

Minimum Pay Period

Paying salaries at least twice a month is required. You may pay on a regular basis, such as the first and 15th of the month, every two weeks, or even weekly or daily. All hours performed from the first to the fifteenth of the month, for example, are paid on the first of the following month. The 15th of the next month would be paid for all hours worked from the 16th until the end of the month. There may be certain exclusions based on the standard of the trade or profession, however Ohio State Code Section 4113.5 does not mention any particular exemptions.

Payroll Deduction Regulations

There are no deduction restrictions in Ohio, save that deductions cannot bring an employee’s pay below the minimum wage. When employing staff, though, it’s a good idea to let them know what deductions you make and to keep track of them in the employee handbook.

Laws Regarding Final Paychecks

If you terminate or dismiss an employee, you must pay their last salary on the following scheduled payday or within 15 days, whichever comes first. You can’t withhold a payment for any reason, but there are no laws in Ohio about whether you have to compensate for unpaid time off (PTO). Make certain that this is stated in your company’s policy.

Paid Time Off (PTO) has been accrued.

There are no regulations in Ohio regarding holidays, vacations, or sick days. Although the Family Medical Leave Act does not compel you to offer paid vacation time, it does oblige you to provide up to 12 weeks of unpaid sick leave for personal sickness or caring for a sick member of the employee’s immediate family. The Department of Labor’s sick leave breakdown might help you learn more.

HR Laws in Ohio That Affect Payroll

Except when it comes to kids, Ohio has minimal HR rules. When employing minors, you must consider their break schedules as well as the tasks and hours they work.

Reporting of New Hires in Ohio

Within 20 days after hiring, you must notify the Ohio Department of Job and Family Services. This may be done online using the New Hire Reporting Center.

Requirements for Lunch and Other Breaks

Adult workers in Ohio are not required to take breaks or meal times, and there are no federal restrictions for meal breaks. When recruiting new workers, be sure to include any corporate rules in your handbook and make them available to them.

Every five hours, minors need a 30-minute rest interval. Keep meticulous notes of the start, stop, and rest periods. These documents must be retained for a period of two years.

Minors in the Workforce

Minors under the age of 18 are covered under Ohio’s child labor statutes. Employers should require all children to obtain employment certifications, and minors 14–17 need a work permit.

Minors aged 16 and 17 who must attend school are not permitted to work before 7 a.m. on school days or 6 a.m. otherwise. They are not permitted to work beyond 11 p.m. on the night before a school day.

Minors under the age of 16 are not authorized to work during school hours unless Ohio Revised Code Chapter 4109 allows it. They are not allowed to work between the hours of 7 a.m. and 7 p.m., save between June 1 and September 1 or during a five-day school vacation. They may labor till 9 p.m. in certain circumstances. They are only allowed to work three hours per day during the school day and 18 hours per week during the school week. They may work eight hours a day and 40 hours a week while school is not in session. They are not permitted to operate in the following areas:

Manufacturing, mining, and processing are all options.
Except for wrapping and packing meat for sale, work in freezers or meat coolers or in meat processing.
Transportation and truck loading
Except for clerical work, warehouse or storage jobs are available.
Building or repairing
Engine rooms or boiler rooms
Outside window cleaning that necessitates the use of ladders or scaffolding
Cooking or baking under certain circumstances
Pits, racks, and lifting equipment are used in vehicle maintenance.
Except under certain circumstances, door-to-door sales are permitted.

For individuals 16 and 17, the list is more wide, although it largely contains bans against power-driven equipment, such as circular saws and bread machines. Chemical production, explosives, and logging are among restricted occupations.

Forms for Payroll

Most of Ohio’s payroll and withholding documents must be filed online via the Ohio Business Gateway. You’ll also make your payment electronically. While these forms are available online, if you wish to submit by mail, you’ll need a state exemption.

IT 4 Form at Ohio State

The IT 4 is Ohio’s withholding exemption form. It must be completed within ten days of hiring a new employee or whenever the number of exemptions changes. If employees move school districts, they must complete out a new one.

Other Payroll and Tax Forms from the State of Ohio

Federal Forms for Payroll

W-4 Form: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
W-2 Form: This form is used to report total yearly earnings (one per employee)
W-3 Form: Reports all workers’ total pay and taxes.
Form 940: This form is used to report and compute the amount of unemployment taxes owed to the IRS.
Quarterly income and FICA taxes deducted from paychecks are reported on Form 941.
Annual income and FICA taxes deducted from paychecks are reported on Form 944.
Non-employee pay information is included on 1099 forms to assist the IRS in collecting taxes on contract labor.

Payroll Tax Resources and Sources in Ohio

Conclusion

Breaks, time off, and salary deductions are not required in Ohio. In comparison to other states, it has a broader concept of employer/employee. In many circumstances, federal law may be followed. However, income taxes must be paid on a different timetable than in many other states, and you must withhold school district taxes in Ohio. To avoid penalties, make sure you understand your responsibilities.

Consider utilizing payroll software like Gusto to help you file correctly and on time. It provides free direct deposit to workers as well as health insurance benefits. If your payroll is incorrect and you are punished by a tax agency, the firm will cover the cost. Sign up for a free 30-day trial.