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Ohio’s Minimum Wage To Increase

The state’s minimum wage will increase to $7.95 per hour for non-tipped employees and to $3.98 per hour for tipped employees, plus tips, effective January 1, 2014. The increased minimum wage will apply to employees of businesses with annual gross receipts of more than $292,000.

The current 2013 Ohio minimum wage is $7.85 per hour for non-tipped employees and $3.93 for tipped employees, plus tips. The 2013 Ohio minimum wage applies to employees of businesses with annual gross receipts of more than $288,000.

What determines the annual changes? The state minimum wage is tied to the Consumer Price Index (CPI) for urban wage earners and clerical workers for the 12-month period prior to September. This CPI index rose 1.5 percent over the 12-month period from September 1, 2012, to August 31, 2013. The wage rate for non-tipped employees is rounded to the nearest five cents.

For employees at smaller companies (with annual gross receipts of $288,000 or less per year in 2013 or $292,000 or less per year after January 1, 2014) and for 14- and 15-year-olds, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour, which requires an act of Congress and the president’s signature to change.

United States v. Windsor: Where Is My Money? Obtaining Tax Refunds for Same-Sex Spouse Benefits


It is hard to believe that nearly four months have passed since the United States Supreme Court issued its landmark decision in United States v. Windsor. As a reminder, the Supreme Court held that the provisions contained in the Defense of Marriage Act (“DOMA”) that exclude same-sex relationships from the definition of marriage and spouse for federal law purposes (i.e., Section 3 of DOMA) are unconstitutional. The broad impact of this holding is clear: for purposes of federal law (e.g., ERISA, the Internal Revenue Code, etc.), same-sex marriages must be treated the same as opposite-sex marriages. But, while the general effect is clear, the Supreme Court’s decision left many questions unanswered.

The various federal agencies have begun churning out guidance to fill these gaps. For example, we now know that both the Internal Revenue Service (the “IRS”) and the Department of Labor (the “DOL”) have adopted a “state of celebration” standard for defining “spouse” and “marriage.” This means that same-sex couples who are married in a domestic or foreign jurisdiction that recognizes same-sex marriages will be treated as legally married for federal tax and employee benefit plan purposes, regardless of whether the couple lives in a state that does not recognize same-sex marriage. We also know the deadline for employers to begin following these rules with respect to the administration of their qualified retirement plans was September 16, 2013.

While this was all welcome guidance for employers and employees, it left everyone wondering whether the Supreme Court’s decision would have any retroactive effect and, if so, how this would impact prior year tax returns. In what should be viewed as good news for both employers and employees, the IRS has responded: both employers and employees can file claims for tax refunds related to same-sex spouse benefits.


Before the Supreme Court’s Windsor ruling, if an employer provided health coverage for an employee’s same-sex spouse, the value of that coverage was included in the employee’s gross income and was subject to federal income tax. Similarly, if the employer sponsored a cafeteria plan that allowed employees to pay premiums for health coverage for their same-sex spouses, those premiums were generally paid on an after-tax basis.

One impact of the Windsor ruling is that the value of employer-provided coverage for same-sex spouses is no longer included in the employee’s gross income (and is not subject to federal income tax), and employees can now make pre-tax contributions to cafeteria plans to pay for the cost of coverage for their same-sex spouses. This much was immediately clear based on the Supreme Court’s ruling. However, recent IRS guidance confirms that employees can also get refunds of federal income tax paid in relation to same-sex spouse benefits.

In a set of recently issued Q&As, the IRS confirmed that employees who file an amended income tax return (i.e., an amended Form 1040) can recover federal income tax paid on both the imputed value of employer-provided health coverage for same-sex spouses and the premiums the employee paid on an after-tax basis. Employees can receive a refund for all open tax years (all years for which the period of limitations for filing a claim for refund is open). The deadline for requesting a refund for a particular year is the later of (a) three years following the date the return was filed or (b) two years from the date the tax was paid.


Employers can also obtain refunds of employment taxes paid with respect to benefits provided to same-sex spouses, and the IRS has issued simplified procedures that employers can utilize to request these refunds for open tax years.

Before Windsor, employers were required to withhold and pay employment taxes on the value of employer-provided health coverage for same-sex spouses and on amounts contributed by employees to a cafeteria plan on behalf of same-sex spouses. Because these amounts are no longer taxable following the Windsor ruling, employers are no longer subject to these additional employment taxes.

In Revenue Ruling 2013-17 and a related set of Q&As, the IRS clarified that employers can claim refunds of employment taxes related to these same-sex spouse benefits, provided the period of limitations for filing a claim for refund is open. Generally, employment taxes are reported quarterly on Form 941, and the process for recovering overpayments is relatively complicated. To receive a refund of overpaid employment taxes, an employer generally must (a) obtain statements/consents from employees, (b) repay or reimburse employees in the amount of any overpayments of FICA tax and income tax withholding, (c) file a Form 941-X for each corrected quarter, and (d) file Forms W-2c.

Recognizing the impracticality of this approach, the IRS issued Notice 2013-61, which provides simplified methods for requesting refunds of employment taxes for 2013 and prior years.

  • Employment Tax Returns in Third Quarter of 2013. If an employer withholds employment taxes for same-sex spouse benefits in the third quarter of 2013, but repays or reimburses the employee for the amount of these taxes before filing the third quarter Form 941, the employer will not include these amounts when reporting wages and withholding on the third quarter 2013 Form 941. If the employer does not make the repayments/reimbursement before filing the third quarter 2013 Form 941, the employer can use one of the following two alternatives to make adjustments for the third quarter of 2013.
  • Other 2013 Adjustments. Employers that overpaid on taxes in the first three quarters of 2013 can utilize one of the following alternatives to claim a refund.
  • Alternative One: Correct before close of calendar year. Under this first alternative, the employer must repay or reimburse the employee for any overpayments that occurred during the first three quarters no later than December 31, 2013. On the fourth quarter 2013 Form 941, the employer would then reduce (1) fourth quarter wages, tips, and other compensation reported on line 2, (2) taxable social security wages reported on line 5a, and (3) taxable Medicare wages reported on line 5c. The reduction is equal to the amount of the same-sex spouse benefits treated as wages for the first three quarters of 2013.

Employers would also reduce the income tax withheld from wages, tips, and other compensation reported on Line 3 of Form 941. This reduction is equal to the amount of income tax withholding with respect to the same-sex spouse benefits that are repaid or reimbursed to the employees by the end of the calendar year. Finally, if the value of any same-sex spouse benefits was included in taxable wages subject to additional Medicare tax withholding on line 5d in any of the prior 2013 Forms 941, there would be a corresponding reduction in the amount of taxable wages subject to additional Medicare tax withholding that is reported on the fourth quarter 2013 Form 941.

There are some additional rules that apply to employers that utilize this correction method. However, employers that intend to seek repayments for 2013 may want to utilize this method in order to avoid filing additional Forms 941-X and Forms W-2c for the 2013 calendar year (as is required under Alternative Two).

  • Alternative Two: Correct after close of 2013 calendar year. This second alternative applies if the employer does not repay or reimburse the employee for any overpayments that occurred during the first three quarters by the December 31, 2013 deadline. Under this method, the employer would file the fourth quarter 2013 Form 941 without taking the adjustments described in Alternative One.

The employer would then file a single Form 941-X for the fourth quarter of 2013 to claim refunds for all of 2013. The employer must follow the usual requirements for filing the Form 941-X, including repaying/reimbursing the employees, obtaining required statements, providing the IRS and employees with a Form W-2c, etc. The employer should write “WINDSOR” in dark, bold letters across the top margin of page 1 of Form 941-X.

This method can only be used to seek a refund of FICA taxes attributable to the same-sex benefits; federal income tax refunds are not permitted because the 2013 calendar year will have closed. Thus, Alternative One may be a better approach where administratively practicable.

  • Prior Year Adjustments (Before 2013). As previously noted, employers can also obtain reimbursements for prior years, so long as the period of limitations for filing
 a claim for refund is open. For each open year, the employer would file a single Form 941-X for the fourth quarter of that year, which would include the adjustments or refunds for all overpayments of employment taxes with respect to same-sex spouse benefits provided during that year. While the employer can file a single Form 941-X for each open year (as opposed to a separate Form 941-X for each quarter), the usual procedures for corrections apply (i.e., repaying/reimbursing the employees, obtaining required statements, providing the IRS and employees with a Form W-2c, etc.). The employer should write “WINDSOR” in dark, bold letters across the top margin of page 1 of each Form 941-X. As with “Alternative 2”, this special administrative procedure for prior years can only be used to seek a refund of FICA taxes attributable to the same-sex benefits.


Many of the questions surrounding the Supreme Court’s Windsor decision are still unanswered. For example, we still do not know how the cost of same-sex spouse benefits should be treated for state tax purposes (particularly in states that do not recognize same-sex marriage). However, the IRS’s recent guidance on the federal tax treatment of same-sex spouse health benefits provides much-needed direction to employees and employers who were left wondering, “Where is my money?”

Even though the IRS has provided “simplified procedures” for requesting refunds, there are certain aspects of these rules that can complicate the refund process. Accordingly, employers and employees that plan to take advantage of this refund opportunity should utilize competent legal counsel or professional tax advisers to make sure all of the IRS’s refund requirements are satisfied.

2014 Tax Season to Start Later

The Internal Revenue Service has delayed by approximately one to two weeks the start of the 2014 filing season to allow adequate time to program and test tax processing systems following the 16-day federal government closure.

The original start date of the 2014 filing season was January 21, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than January 28 and no later than February 4.

Taxpayers must still file a return by April 15, and companies must still send W-2 and other tax forms on schedule, usually by January 31.

The government closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year.

In addition, IRS processes, applications and databases must be updated annually to reflect tax law updates, business process changes, and programming updates in time for the start of the filing season. There are many tax changes this year, particularly due to the 3.8 percent net investment income tax from the Affordable Care Act.

About 90 percent of IRS operations were closed during the shutdown, with some major workstreams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention.

During the closure, the IRS received 400,000 pieces of correspondence, on top of the 1 million items already being processed before the shutdown.

This will be the second tax season in a row to have a delayed start. Last year’s filing season was significantly delayed because Congress passed the American Taxpayer Relief Act of 2012, which contained many retroactive provisions, in January 2013, and the IRS needed time to update forms and program and test its processing systems.

The IRS is exploring options to shorten the expected delay and will announce a final decision on the start of the 2014 filing season in December.

Hearings Taking Place on Legislation to Simplify Ohio’s Municipal Income Tax System

Municipal Tax ReformProponents Emphasize the Goal Is to Reduce the Cost Burden on Small Businesses

Proponents and opponents of legislation seeking to establish a uniform, cost-effective set of rules and regulations governing the municipal income tax system are expressing their views before Ways and Means Committee members of the Ohio House. Hearings are continuing during the week of May 6.

House Bill 5, the latest legislative effort to simplify the state municipal income tax system, was introduced in January. It has support from business groups, including the Ohio Society of CPAs, a coalition of organizations and individual taxpayers. They contend that the administrative burden and costs for many Ohio businesses impedes them from creating more jobs across Ohio.

Ohio is just one of a few states in which municipalities impose an income tax on individuals and businesses. Those businesses must track and comply with as many as 600 different sets of tax ordinances, depending on where they conduct business.

The proposed legislation would establish a more uniform municipal tax code that all municipalities assessing a tax on businesses or individuals would follow, including a uniform definition of income, withholding, penalties and interest, and all related rules and regulations other than tax rate and reciprocity rate.

The bill creates the Municipal Tax Policy Board charged with creating a uniform form. It may also recommend rules. The board will be comprised solely of seven city representatives with no business or taxpayer representatives.

Five of the seven members are required to be local tax administrators. Of the two remaining members, one must be an employee of the Regional Income Tax Authority (RITA) and one must be an employee of the Central Collection Agency (CCA).  Both RITA and CCA are agencies that currently collect municipal taxes for a number of cities and villages throughout Ohio.

In addition to unifying some of the definitions for income and deductions, the bill also requires not counting anything less than a half-day as a workday for income tax purposes. It also would expand the number of days that someone must work in a community before he or she is liable for any income tax there. Currently, the threshold is 12 days per year. The proposal would expand that to 20 days.

Opponents, largely from cities, insist that the cost of compliance with the current municipal tax laws is overstated. Proponents contend that Ohio’s current municipal tax system presents compliance problems for individual and business taxpayers, costs existing employers resources that could be redirected to growing their businesses and creating more jobs, and puts Ohio at an economic disadvantage for attracting new employers.

The proposed legislation does not call for a centralized collection system, nor is it looking to reduce the amount of tax that individuals and businesses must pay.

BWC, Governor Propose $1 Billion Rebate to Employers

Proposal Includes Tripling Safety Grants and Lower Rates from Modernizing Operations

OBWCThe Ohio Bureau of Workers’ Compensation (BWC) and Governor John Kasich have proposed that the BWC give back $1 billion to private employers and local governments in the form of rebates. The proposal also triples investments in worker safety grants and lowers all rates by modernizing workers’ comp operations. The $1.9 billion proposal is made possible by larger-than-expected fund balances at BWC generated by strong investment management.

The $1 billion in rebates equals about 56 percent of the most recent annual premium of the approximately 210,000 private and public sector employers. The BWC would send the rebates to employers by check.

The rebate proposal is expected to be submitted to the BWC Board of Directors for approval at its meeting in late May. The proposed rebates will apply to employers who are in discount programs as well as those who are not.

According to the proposal, companies and government employers that pay premiums into the state fund for injured workers and have up-to-date policies are eligible for a rebate of 56 percent of what they were billed for their last policy year. In addition to the rebates, the bureau wants to require employers to pay premiums upfront instead of after a coverage period.

The proposed switch to prospective premium payments requires legislative approval, which the bureau hopes to gain this year. The switch would not go into effect until 2014 at the earliest.

The bureau wants to give employers a credit equal to their previous six months’ premium as part of the transition to a new payment system. To do so, the BWC would issue a credit to employers totaling $900 million to help offset the costs associated with the transition. The switch would lead to rate reductions of two percent for private employers and four percent for public employers.

Along with the request for rebates, the proposal also increases the Ohio’s Safety and Wellness Grant Program from $5 million to $15 million. The state’s program has proven effective. In companies receiving grants, claims frequency has decreased 66 percent and claims costs per full time employee has decreased 86 percent.

Furthermore, the proposal lowers rates 2 percent for private employers and 4 percent for public employers by modernizing BWC’s payment system.

Details on the proposal are still being finalized. All three elements would be funded from BWC’s net assets, which have grown to  $8.3 billion and are far in excess of the target funding ratio of assets to liabilities established by the BWC board in 2008.