Registration Requirements in Ohio
Depending on the type of business you operate, you may be required to register with several state agencies in the State of Ohio. The Ohio Secretary of State created a road map for new businesses to assist with registration requirements. You can find the road map here.
S-Corporation Income Tax
Ohio recognizes the federal S election with regards to income tax, but nonetheless requires S corporations to pay the commercial activity tax. In addition, an individual S corporation shareholder will owe tax to the state on his or her share of the company’s income.
LLC/Partnership Income Tax
LLCs and partnerships are required to pay Ohio’s “Commercial Activity Tax” on Ohio gross receipts, described below. In addition, net income from the LLC/partnership is distributed to the individual owners, who then must pay state taxes on the amounts allocated to them.
Commercial Activity Tax
Ohio implements a “Commercial Activity Tax” that applies to nearly every Ohio business and is based on gross receipts.
The commercial activity tax is computed based on the business’ gross Ohio receipts, as follows:
Ohio has special online registration requirements for the commercial activity tax, as well as special rules about how often, and when, businesses must pay the tax. For example, businesses with over $1 million in gross receipts must pay this tax on a quarterly basis; the quarterly returns are due by the 10th day of the second month following each calendar quarterly tax period (May 10th, August 10th, November 10th, and February 10th.
Pass-Through Entity Withholding Tax
Pass-through entity withholding returns are required for qualifying pass-through entities doing business in Ohio. Ohio IT 1140 is the form used to report withholding tax due on pass-through entity distributive shares of income.
Individual Income Tax
Ohio has a static conformity with the Internal Revenue Code as it existed on March 27, 2020. This includes conforming with the CARES Act, also known as the Coronavirus Aid, Relief, and Economic Security Act, but only for tax years 2019 and prior.
The federal adjusted gross income is the starting point in computing Ohio taxable income.
Ohio does not offer an option for using the standard or itemized deduction. However, there are a variety of different tax credits and deductions that you may qualify for.
Here are some common tax credits offered to Ohio state residents:
• Retirement Income credit
• Senior Citizen credit
• Child and Dependent care credit
• Ohio Adoption credit
Here are some of the more common deductions:
• Tuition Expenses paid to qualified Ohio educational institution
• Medical Saving Account deduction
• Long term Care Premium deduction
Ohio allows a personal exemption for you and your spouse, if filing a joint return. They do allow a dependent exemption for all dependents properly claimed on your federal tax return.
They do not conform to the Internal Revenue Code (IRC) section 199A, also known as the QBI deduction.
Individual income tax varies by taxable income and filing status. Tax rate brackets are as follows.
Returns are due on the 15th day of the fourth month following the close of the tax year. For most taxpayers, the due date is April 15th. If the due date falls on a weekend or holiday, the due date becomes the next business day.
Pass through entities are required to make estimated payments if the sum of the adjusted qualifying amounts exceeds $10,000 and the sum of the following tax year will exceed $10,000. Pass-through entities can use Form IT 1140 UPC.
Individuals should make estimated payments if your estimated Ohio tax liability is more than $500. Individuals should use Form IT 1040ES.
Filing an Extension
Pass through entities and individuals requesting a federal extension will automatically be granted an Ohio extension. Pass through entities must check the extension box on their return. Individuals and pass through entities must attach a copy of their federal extensions when filing.
A failure to file penalty may be assessed if a return is not timely filed. The penalty is the greater of $50 per month up to a maximum of $500, or 5% per month up to a maximum of 50% of the tax.
If your business was formed or is located in another state, but generates income in Ohio, it may be subject to Ohio taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Ohio Secretary of State:
Ohio Department of Taxation: