Municipal Qualifying Wages for Withholding

In accordance with recently enacted law in Ohio creating uniform provisions for municipal income tax, the following summary has been provided to assist in calculation of municipal qualifying wages for withholding tax purposes.

An employer is required to withhold only on “qualifying wages”, which are wages as defined in Internal Revenue Code Section 3121(a), generally the Medicate Box of the Form W-2.

• Medicare Exempt Employees – Are subject to the requirements for “qualifying wages” in the Medicare Wage Box of the Form W-2 even though that box will remain blank.
• Cafeteria Plans – IRC Section 125 wages are not included in the definition of Medicare Wages and do not need to be deducted from the Medicare Wage Box.
• 401(k), 457 and Supplemental Unemployment Compensation Benefits – These items should all be included in the Medicare Wage Box and are subject to withholding requirements.
• Nonqualified Deferred Compensation Plan – Income from nonqualified plans is included in the definition of “qualifying wages” at the time the income is deferred and is subject to withholding requirements.
• Stock Options – Income from the exercise of stock options is included in the definition of “qualifying wages” and is subject to withholding requirements.
• Disqualifying Disposition of an Incentive Stock Option – Employer is not required to withhold, but the income is considered “qualifying wages” and the recipient is liable for the tax.

Note: As an employer, if the Medicare Wage Box is not the largest figure on the W-2 form, a written explanation will be required.

Village of Evendale                                             
Income Tax Department                                   
Phone: (513) 563-2671                                            
Fax: (513) 563-4636