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CITY OF CINCINNATI 2004

INDIVIDUAL INCOME TAX RETURN INSTRUCTIONS

Office Phone: (513) 352-2546

Toll Free General Information: (877) 767-1661

Website: -oh.gov/citytax

Mail to: 805 Central Ave Suite 600, Cincinnati OH 45202-5756

Returns must be filed by everyone required to submit a Declaration of Estimated Tax, even though Declaration was accurate and paid in full.

This form is to be used by individuals who receive W-2s or Misc 1099 income, Sole Proprietors/Single Member LLCs (Schedule C), rental and other income from

Schedules E, F and/or K-1.

Changes Required by State Law for Tax Year 2004:

Uniform Withholding Tax Base. This base is now defined as Qualifying Wages. “Qualifying wages” generally include amounts reported in the Medicare wage

base (The amount in Box 5 on the W-2.) plus supplemental unemployment compensation benefits described in Section 3402(o)(2) of the Internal Revenue Code

and compensation of pre-1986 employees exempt from Medicare that is not in the Medicare wage base solely because of the Medicare grandfathering provision.

Deferrals to nonqualified deferred compensation plans included in Medicare Wages are now subject to local tax at the time of deferral.

The due date for filing Net Profit returns is April 15

, 2005 or the 15

day of the fourth month following the fiscal year end.

The amount of stock options paid to Cincinnati employees remains nontaxable to the employee.

One-half of the self-employment tax is no longer an allowable deduction.

All non-residents’ businesses must use the Schedule Y Three-Step Apportionment Formula to determine the Cincinnati share of taxable income.

Original Cost will be used in Step 1 of Schedule Y to determine property value.

The safe harbor for annualizing estimated taxes based on the current year is 90% for tax year 2005.

Instructions for Completing the Individual Income Tax Return for Tax Year 2004

LINE 1: Enter the total qualifying wages (generally the amount in Box 5 of W-2s). If stock options are included in Box 5, deduct

stock options to determine qualifying wages. Provide documentation of the stock options exercised. Attach copies of W-2s with your

return. For multiple W-2s complete all columns of Worksheet A on page 2.

LINE 2: Enter the amount of unreimbursed employee business expenses. You must include a copy of Federal Form 2106 or 2106EZ

to support the deduction.

LINE 3: Line 1 minus Line 2.

LINE 4: To determine the apportioned taxable wages (for nonresidents or part-year residents only), complete the Wage

Apportionment Formula on page 2. Enter the calculated percentage. If appropriate, compute a separate percentage for each W-2 and

enclose a schedule of your calculations. Residents report 100% on this line.

LINE 5: Multiply Line 3 by Line 4.

LINE 6: Complete Worksheet B Business Income or Loss.

Schedule C- Business Income: Combine the profits and losses from all businesses reported on Schedule C. Residents are subject to

Cincinnati tax on all business income no matter where earned. Nonresidents of Cincinnati may multiply net profits by the

apportionment percentage derived on Schedule Y to determine the Cincinnati Taxable Income/(Loss).

Schedule E-Rental Income : Cincinnati residents report all profits or losses from rental property no matter where property is located.

Nonresidents of Cincinnati report profits or losses only from properties located within Cincinnati. Total monthly rents collected must

exceed $500 per month to be reportable to Cincinnati.

Schedule E-Flow-through Profits or Losses : The tax is levied on the partners, members or other owners of a flow-through entity

excluding S-Corporations. Businesses operating in Cincinnati are required to report their portion of Net Profit in Cincinnati and remit

the tax on behalf of all their partners. Residents of Cincinnati are to report their distributive shares of income or loss that was not

withheld on by the business. The taxpayer may claim a credit for taxes paid to other localities by the business

Other Income: Please provide documentation such as copies of federal schedules or Forms 1099.

NOL Carryforward: Enter the amount of net operating losses apportioned to Cincinnati. Operating losses may be carried forward for

a maximum period of five tax years. An explanatory schedule is required to support the carry-forward operating losses claimed on

the return.

Total Income/ (Loss): Add all the profits and deduct the losses in the Cincinnati Taxable Income column. Enter on Line 6 Page 1.

The Cincinnati taxable income is determined by multiplying the Cincinnati percentage indicated by the net profits from Schedules C,

E, F, K-1 or 1099. The Schedule Y- Business Apportionment Formula (CMC 311-7) on page 2 is completed by nonresidents that earn

a portion of their net profits in Cincinnati. (Refer to Regulation R-7 for complete details.)

Worksheet A- Salaries - Wages Tips And Other Compensation - City Of Cincinnati - 2004 Page 2

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