Form Eqr/pw3 - Employer'S Municipal Income Tax Withholding 2007 (Page 2 of 7) in pdf

Form Eqr/pw3 - Employer'S Municipal Income Tax Withholding 2007 Page 2

Municipal Qualifying Wages for Withholding

Effective Date: January 1, 2004 – Ohio Revised Code Sec. 718.03

Medicare Wages

An employer is required to withhold only on “qualifying wages,” which are wages as defined in Internal Revenue Code Section 3121(a), generally the

Medicare Wage 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 wage figure on the W-2 form, a written explanation will be required.

Form Eqr/pw3 - Employer'S Municipal Income Tax Withholding 2007 Page 2