Frequently Asked Questions

Answers


How do I handle the 07/01/18 tax rate increase for withholding purposes?

Employers should begin the withholding with your last payroll in June, which will be your first payroll paid after July 1st.

Please pay particular attention to the bold-ed language from Canton's Income Tax Code, below.

182.051 COLLECTION AT SOURCE; WITHHOLDING FROM QUALIFYING WAGES.
(A) (1) Each employer, agent of an employer, or other payer located or doing business in the Municipality shall withhold from each employee an amount equal to the qualifying wages of the employee earned by the employee in the Municipality multiplied by the applicable rate of the Municipality's income tax, except for qualifying wages for which withholding is not required under section 182.052 of this Chapter or division (D) or (F) of this section. An employer, agent of an employer, or other payer shall deduct and withhold the tax from qualifying wages on the date that the employer, agent, or other payer directly, indirectly, or constructively pays the qualifying wages to, or credits the qualifying wages to the benefit of, the employee.

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What is form 2106?

We apply essentially the same guidelines to 2106 expenses as does the federal government. Expenses must be carried forward to Schedule A, reduced by the 2% AGI floor. We allow the deduction of Employee Business Expenses as reportable on the taxpayer's form 2106, subject to audit and approval by the Income Tax Division.

For verification it is necessary that a copy of the Schedule A, and a detail statement of any Line 4 deduction, "Business Expenses not included on lines 1 through 3," also must be submitted. Please note: other miscellaneous deductions shown directly on Schedule A are not deductible on Canton's tax return.

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How do I handle stock options?

The difference between the "issue price" and the "market price at exercise" is taxable when the stock option is exercised.

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How do I handle Early Retirement - Separation Payouts?

"Early retirement incentive programs" and separation payouts (termination pay, golden parachutes, etc.) are taxable if the recipient was employed within the city of Canton at the time of retirement, regardless of the employees residency status. Resident taxpayers' separation payments are considered taxable, regardless of employment location; however, credit is given for taxes lawfully imposed and paid to the city of employment, up to 2.5%.

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How do I handle Lump Sum Distributions?

Lump sum distributions made from qualified pension and profit-sharing trusts, and not made persuant to an employee's retirement, are taxable.

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How do I submit Federal Schedules?

When submitting copies of federal schedules please remember to copy both sides of the schedules where appropriate. As an example, often we receive a copy of Schedule C and the taxpayer has copied only the front side of the schedule. This delays processing the return until the remainder of the information is available.

On Schedule E the addresses of the rental properties is necessary information, but it is sometimes missing. Also, this schedule needs to accompany the Canton tax return even if a loss is shown.

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What if I do not include a payment with my return?

Taxpayers who file a return timely but do not include payment with the return will be assessed interest penalties up to the time the payment is made. If a taxpayer is financially unable to meet the tax obligation, an installment payment agreement might be allowed, at the discretion of the Income Tax Division.

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What are "Qualifying Wages"?


"QUALIFYING WAGES" means wages, as defined in section 3121(a) of the Internal Revenue Code, without regard to any wage limitations, adjusted as follows:

  1. (1) Deduct the following amounts:
    1. Any amount included in wages if the amount constitutes compensation attributable to a plan or program described in section 125 of the Internal Revenue Code.

    2. Any amount included in wages if the amount constitutes payment on account of a disability related to sickness or an accident paid by a party unrelated to the employer, agent of an employer, or other payer.

    3. Any amount included in wages that is exempt income.

  2. Add the following amounts:

    1. Any amount not included in wages solely because the employee was employed by the employer before April 1, 1986.

    2. Any amount not included in wages because the amount arises from the sale, exchange, or other disposition of a stock option, the exercise of a stock option, or the sale, exchange, or other disposition of stock purchased under a stock option. Division (FF)(2)(b) of this section applies only to those amounts constituting ordinary income.

    3. Any amount not included in wages if the amount is an amount described in section 401 (k), 403(b ), or 457 of the Internal Revenue Code. Division (FF)(2)(c) of this section applies only to employee contributions and employee deferrals.

    4. Any amount that is supplemental unemployment compensation benefits described in section 3402(o)(2) of the Internal Revenue Code and not included in wages.

    5. Any amount received that is treated as self-employment income for federal tax purposes in accordance with section 1402(a)(8) of the Internal Revenue Code.

    6. Any amount not included in wages if all of the following apply:

      1. For the taxable year the amount is employee compensation that is earned outside of the United States and that either is included in the taxpayer's gross income for federal income tax purposes or would have been included in the taxpayer's gross income for such purposes if the taxpayer did not elect to exclude the income under section 911 of the Internal Revenue Code;

      2. For no preceding taxable year did the amount constitute wages as defined in section 3121 (a) of the Internal Revenue Code;

      3. For no succeeding taxable year will the amount constitute wages; and

      4. For any taxable year the amount has not otherwise been added to wages pursuant to either division (FF)(2) of this section or section 718.03 of the Ohio Revised Code, as that section existed before the effective date of H.B. 5 of the 130th general assembly, March 23, 2015.

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    What is witholding?

    Any taxes withheld by an employer are held in trust. It is illegal to withhold any sum and not subsequently forward it to the Division of Taxation as required by the Income Tax Code. Businesses must deposit withheld taxes semi-monthly, monthly or quarterly, depending upon the amount withheld.

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    What are extensions?

    Unless there are unique circumstances (determined on a case-by-case basis), no extension for filing a year-end tax return or making the required year-end payment will be granted for any individual or business whose account is in a delinquent status with us. The delinquency can relate either to documents that have not been filed or to payments that have not been made.

    Also, filing an extension with us does NOT relieve the responsibility for making full payment by the original due date, of the tax anticipated due.

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    What is the City of Canton Income Tax Rate and what type of Income is taxable?

    The income tax rate is two and a half percent (2.5%). Generally, qualifying wages (including most income which is deferred) and business net profits are taxable. A list of taxable and non-taxable income is available at this website.

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    What if I reside in Canton and work in an area with no municipal tax. How often must I file with Canton?

    You must file a Declaration of Estimated Income Tax by April 15th of each year, if the estimate of tax that will not be withheld exceeds two hundred dollars ($200.00) On it you must estimate the amount of tax you will owe for the year. One-fourth of the estimate must be paid with the Tax Return/Mandatory Declaration form. Subsequent payments are due June 15th and September 15th, and December 15th.

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    Is there an age limit for individuals subject to Canton Income Tax?

    Yes. All individuals under eighteen years of age are exempt from City of Canton Income Tax and are eligible for a refund of municipal tax withheld. Senior Citizens aged 65 and older whose income is comprised entirely of non-taxable benefits and earnings such as pensions, social security, etc., may file an exemption form with a copy of their Drivers License or Birth Certificate, and the account will be closed.

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    I am over 65. I am retired. My only income is from Social Security, company pension, interest, and dividends. Am I required to file a City of Canton Income Tax Return?

    No. You are not required to file an income tax return with Canton, nor are you taxed by Canton on these types of income. However, you must file a one-time exemption certificate with us so we will not send you income tax returns in future years.

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    If an individual files late, is there a penalty?

    Yes, a fine of $25 per month will be assessed in each of the first six months, a penalty of 50% of the tax balance due will be imposed immediately upon filing, and monthly interest will be charged at the federal short-term rate.

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    Can I receive assistance in preparing my City of Canton Income Tax Return?

    Yes. The Income Tax Division personnel can assist you either by telephone, mail, or in person. If you visit the Tax Office please bring a copy of your Federal Income Tax Return and all W-2's and 1099's. These will help us assist you in preparing your Canton Tax Return.

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    Can I obtain a copy of the City of Canton Income Tax Ordinance?

    Click on Ordinances on the top of this page to view the tax ordinances online.

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    What is an Independent contactor?

    Many individuals claim to be operating as independent contractors, and some employers have classified certain employees as independent contractors. However, we follow the federal guidelines for determining "independent contractor" status.

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    What must I do if I am a contractor?

    All contractors must be registered with the city's Income Tax Division before performing work within the city. You can obtain the appropriate registration forms from the Income Tax Department, or the Building & Code Department.

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    What do I do with a 1099?

    It is a requirement of the Income Tax Division that copies of 1099's (for other than interest or dividend payments) be submitted by both the payer and the recipient of a 1099.

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    Do I live in the City of Canton?

    Go to the Stark County Auditor Property Search site and find your property record. In the City/Village field, it will state "Canton City" if you are within the city limits.

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    All rights reserved - email: cantontax@cantonohio.gov