Ohio payroll setup for your first hire

Two portals. The SOURCE is not the Ohio Business Gateway.

Texas and Florida do not take state income tax from paychecks. Ohio does. The Ohio Department of Taxation collects that withholding. ODJFS collects state unemployment tax. That tax is often called SUTA, state unemployment tax, or SUI, state unemployment insurance. You register those two accounts on different sites.

ODJFS’s UI Tax for New Employers page sends unemployment registration to The SOURCE. The SOURCE is the State of Ohio Unemployment Resource for Claimants and Employers. The same ODJFS page also links the Ohio Business Gateway, the state’s business-tax portal. Withholding itself is an Ohio Department of Taxation account. A Gateway login is not an ODJFS account. A payroll login is not either account.

When you owe unemployment tax: $1,500 in a quarter, or one person in 20 weeks

Ohio Revised Code § 4141.011 is enough by itself for a regular shop. You are an employer if you pay wages of $1,500 or more in any calendar quarter in the current or preceding calendar year. You are also an employer if you have at least one individual in employment on some portion of a day in each of twenty different calendar weeks in the current or preceding calendar year. One of those two tests is enough.

Other employer definitions sit in the same section. Nonprofit organizations use a four-person, 20-week test. Domestic service uses a $1,000-quarter cash test. Agricultural labor uses $20,000 in a quarter, or ten workers in 20 weeks. A shop already liable for federal unemployment tax can also be subject here. This scorecard is the regular-business path.

This is not Pennsylvania’s one-worker clock. Pennsylvania starts unemployment compensation on the first covered worker and gives you 30 days to register. Ohio still uses the $1,500-quarter or 20-week test. Do not copy Pennsylvania onto Ohio. Do not copy Illinois’s 30-day start-up instruction onto Ohio either. Illinois uses the same dollar-and-week tests. Illinois still wants the new employing unit on file within 30 days of start-up. Ohio’s new-employer page points you to The SOURCE and the Report to Determine Liability.

File the Report to Determine Liability (JFS 20100) on The SOURCE

ODJFS decides liability from the facts you send. The form is the Report to Determine Liability (JFS 20100). Register a new Ohio UI account on The SOURCE employer page, or submit JFS 20100 to the ODJFS Contribution Section. After ODJFS finds you liable, hold the employer account number and the contribution rate on the ODJFS notice. Use that number on reports and payments. Do not substitute a federal EIN. Use the rate on that notice, not a number from a software page.

Ohio Revised Code § 4141.20 is the quarterly clock. A contributory employer files a quarterly contribution and wage report no later than the last day of the first month after the quarter: April 30, July 31, October 31, and January 31. The report names each worker, wages, and weeks paid. Late filing can bring a forfeiture of 0.25 percent of reported remuneration, no less than $50 and no more than $1,000. That is the statute’s figure. A quarterly wage report is not the new-hire report.

Register withholding within 15 days. School district tax uses the same account.

Ohio withholds state income tax from paychecks. The Department of Taxation’s employer-withholding page cites Ohio Revised Code § 5747.06. Every employer that maintains an office or transacts business in Ohio and pays compensation to an employee must withhold. That includes a resident or a nonresident. Register within 15 days of when that liability begins. Registration is free. File online through OH|TAX eServices or the Ohio Business Gateway. Paper is Form IT 1, the Application for Registration as an Ohio Withholding Agent. Taxation’s starting-a-business page repeats the 15-day clock and the Gateway path.

School district income tax is not a city collector. It uses the same Ohio withholding account. The Department of Taxation says you withhold school district tax for an employee who lives in a taxing school district. Check the district on The Finder. Employees complete the Employee’s Withholding Exemption Certificate (Ohio IT 4), or you withhold as if the employee claimed zero exemptions. Payments use the Return for Income Tax Withheld (Ohio IT 501). The Annual Reconciliation of Income Tax Withheld (Ohio IT 941) is due January 31. School district payments use the Return for School District Income Tax Withheld (Ohio SD 101) and the Annual Reconciliation of School District Income Tax Withheld (Ohio SD 141).

City income tax is a separate job. A worksite may go to the Regional Income Tax Agency (RITA), the Central Collection Agency (CCA), or the city itself. One Gateway withholding number does not open those city accounts.

New hire is an ODJFS report, 20 days. It includes many contractors.

The new-hire report is a list of who you just hired. It is not a box on the quarterly contribution and wage report. Ohio Revised Code § 3121.893 requires the report no later than 20 days after you hire an employee, or after you engage or re-engage a contractor. § 3121.89 includes an independent contractor who will receive $2,500 or more in a year, unless a licensed-professional exclusion applies. A rehire after 60 or more consecutive days is a new hire again.

Ohio.gov’s New Hire Reporting page says all employers must report every employee and independent contractor working in Ohio to the Ohio New Hire Reporting Center within 20 days of the date of hire. File at oh-newhire.com, or use the Ohio New Hire Reporting form (JFS 07048). A quarterly ODJFS wage report does not satisfy that clock.

Workplace injury insurance is a BWC policy from the first hire

This is the opposite of a four-employee wait. It is also the opposite of a private-carrier shopping trip. Ohio treats coverage as due when you regularly employ one or more people. You buy it from BWC, not from a payroll login.

Ohio Revised Code § 4123.01 counts every person in the service of a private shop that employs one or more persons regularly in the same business. Household and casual workers count once they earn $160 or more in cash in a calendar quarter from that household or employer. § 4123.35 sends every private employer into the state insurance fund, unless BWC approves that shop to self-insure. Ordinary first-hire shops do not self-insure. Apply on the Application for Ohio Workers’ Compensation Coverage (U-3). BWC’s applying-for-coverage page is the start of that file.

Later is not a new waiting period. If you still have employees, including casual labor or part-time help, BWC’s canceling-coverage page says you still need an active policy. Coverage runs through the last date an employee was employed. A sole proprietor with no employees may ask for elective coverage. That is not the first-hire path. A payroll login is not a BWC certificate.

How Gusto and Patriot describe Ohio

Confirm the live withholding number on OH|TAX eServices or the Ohio Business Gateway. Confirm the unemployment account and rate on The SOURCE. Confirm workplace injury insurance on BWC.

Gusto’s Ohio help article says Middesk (Gusto’s business-verification company) may register state income-tax withholding and state unemployment insurance (SUI). Confirm the live numbers on OH|TAX eServices and The SOURCE. Confirm the rate on the ODJFS notice. Middesk’s standard order does not include local tax agencies. City, RITA, and CCA accounts often still sit on the employer. Gusto also asks you to name it as your authorized payroll service provider and bulk filer with the Department of Taxation. Gusto’s forms list names the Annual Reconciliation of Income Tax Withheld (IT 941), the Return for School District Income Tax Withheld (SD 101), the Return for Income Tax Withheld (IT 501), the quarterly unemployment return (JFS 20125), the Annual Reconciliation of School District Income Tax Withheld (SD 141), Form IT 3, a municipal Form 11, and an Ohio new-hire report. Read Gusto’s Ohio article and Gusto’s forms list. See Gusto on the directory.

Patriot’s tax table says Full Service files Ohio Unemployment Insurance (SUI or SUTA) on Form JFS 20125. It files Ohio income-tax withholding on Form IT 501, Form IT 941, and Form IT 3. It claims school district taxes, city taxes, and Joint Economic Development District (JEDD) and Joint Economic Development Zone (JEDZ) taxes. Patriot’s registration article tells you to open withholding on the Ohio Business Gateway and unemployment on The SOURCE. It does not claim Patriot opens those accounts. The Department of Taxation’s withholding page calls IT 941 the annual reconciliation. Confirm that calendar on the agency page, not the software table. Use the unemployment-tax rate on your ODJFS notice, not a number from a software page. Read Patriot’s article. See Patriot on the directory.

What still sits on the employer

• Decide that the $1,500-quarter test, or the 20-week test, has been met. Household, agricultural, and nonprofit shops use other tests.
• File JFS 20100 on The SOURCE so ODJFS can determine unemployment liability.
• Hold the ODJFS employer account number. Do not substitute a federal EIN.
• Enter the rate from the ODJFS notice, not a marketing figure.
• File the quarterly contribution and wage report, even after a quiet quarter, once you are a contributory employer.
• Register withholding within 15 days of when that liability begins, on OH|TAX eServices or the Ohio Business Gateway.
• Collect IT 4. File IT 501. File the annual IT 941. Withhold school district tax on the same state account when The Finder says the worker lives in a taxing district.
• Open the city, RITA, or CCA account for the worksite. One state withholding number does not cover those locals.
• File the Ohio new-hire report within 20 days, including many independent contractors. A quarterly ODJFS wage report does not satisfy that clock.
• Buy workplace injury insurance from BWC when you regularly employ one or more people. Keep that policy while anyone, including part-time or casual help, still works. Payroll software does not issue that policy.
• Do not copy another state’s clock onto Ohio. Ohio withholds state income tax from paychecks. Ohio does not use Pennsylvania’s one-worker unemployment clock.

Related guide: Hiring your first employee lists the federal forms that sit next to the 15-day withholding clock.

Related guide: Can I do my own payroll? covers the federal payday. City income tax is still a separate account from state withholding.

Related guide: Independent contractor vs employee is the federal label check. Ohio’s contractor new-hire report is not that test.

Related guide: Best payroll software for small business is a checklist for grading a product against the two portals and the separate city-tax account.

Related guide: How to run payroll is the federal payday. City income tax is still a separate account from state withholding.

Also forming a company in Ohio? Process Score compares registered agents there.