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City of Solon
Finance Department
34200 Bainbridge Road
Solon, Ohio 44139
Phone: 440.349.6300 Fax: 440.349.6320
What is the City of Solon Income Tax rate and what type of income is taxable?
What is a credit? Does Solon give a credit?
Is city withholding tax based on employee work location or residence?
How can I make sure my employer is withholding the correct local tax from my wages?
Is it possible to amend my estimate during the year?
If an individual files late, is there a penalty?
What if I file timely but do not include payment with my return?
Can I receive assistance in preparing my City of Solon Income Tax Return?
How do I submit Federal Schedules?
I'm starting a business. What do I need to know about city taxes?
I'm self-employed but my business has not shown a profit. Am I required to file a return?
I'm serving in a fiduciary capacity. What is my responsibility for filing?
How do I handle stock options?
How do I handle Early Retirement - Separation Payouts?
How do I handle Lump Sum Distributions?
S CorporationsWhat is an Independent Contractor?
What must I do if I am a contractor?
What do I do with a Form 1099?
Real Estate and Insurance Sales
What are the top 10 mistakes people make in filing a tax return?
All Solon residents and partial year residents, eighteen (18) years of age or older, must file an annual city income tax return, whether or not any tax is due.
All individuals under eighteen (18) years of age are exempt from the Solon income tax and are eligible for a refund of Solon municipal tax withheld by an employer.
Nonresidents of Solon: any person who worked or earned income in the City of Solon and did not have the proper amount of tax withheld (i.e., 2%) for Solon should file an annual return. Also, any person or entity who operated a business or owned rental property in Solon must file an annual return.
[top]Returns must be filed on or before April 15th following the close of the calendar year, or within four (4) months from the end of their fiscal year. Any tax form that is not signed or does not have W2's and/or 1099's attached or does not have the appropriate Federal Schedules attached will not be considered as being filed until such signature and/or documents are received at the tax office.
What is the City of Solon Income Tax rate and what type of income is taxable?
Solon's tax rate is 2.00% and is based on qualified wages and business net profits.
[top]Earned income such as salaries, wages, commissions, wage continuation plans, sick pay, vacation pay, tips, distributive shares of the net profits of a partnership or subchapter S corporation, net profit from a business, net rental income, and income from lotteries and games of chance.
[top]Income such as dividends, interest, military pay, pensions, alimony, child support, Social Security, Medicare, poor relief, unemployment insurance benefits if received from state or local governments, gifts, inheritances, scholarships, or involuntary conversions
[top]What is a credit? Does Solon give a credit?
A credit is where a city gives a reduction in a municipal income tax liability to a resident who pays city income taxes to a municipality where they work. Yes, Solon gives a credit to Solon residents for municipal income taxes paid to other municipalities in an amount not exceeding 2% of their Solon Taxable income.
[top]The Tax Division is here to help with any city tax return issue. For everyone's convenience, forms are available on our website at www.solonohio.org or at the library. Returns and extensions can be dropped off, day or night, in the depository mailbox located at the entrance to City Hall. Operating hours for the Tax Division are 8:00 am to 4:30 pm Monday through Friday. During March and April the Tax Office is also open Saturday mornings by appointment.
[top]Withholding taxes are those subtracted by the employer from employee wages pursuant to the provisions of the City Ordinance. Any taxes withheld by an employer from an employee are held in trust. Consequently, it is illegal to withhold any sum and not subsequently forward it to the Tax Division as required by the City Ordinance. Businesses must deposit withheld taxes monthly or quarterly, depending upon the dollar amount withheld.
[top]Is city withholding tax based on employee work location or residence?
City withholding is based upon the employee's work location (municipality) and employers are legally obligated to withhold to the requirements of that work location (municipality). Local tax is due first to the city where the income was actually earned. As a secondary factor, you may have an obligation to your city of residence.
In the event you work in an unincorporated area or township that has no local tax, your entire local tax obligation is to your city of residence, in this case, Solon. Your mailing address, which is assigned by the U. S. Postal Service, does not always indicate the city limits within which you reside. Similarly, you cannot rely on your School District, because such entities do not always follow city boundaries. To determine the city in which a certain address is located, for example, Solon or Glenwillow, please call our office. Finally, if you are a registered voter, it should be easy for you to determine your city of residence.
[top]How can I make sure my employer is withholding the correct local tax from my wages?
Look at the gross wage figure on your paycheck stub. If you are an hourly employee, your gross wage has generally been computed by multiplying your hourly rate (or overtime rate if applicable) by the number of hours you worked during the period. Gross wages for a salaried employee are generally determined by dividing gross annual salary by the number of pay periods in the salary year. Whether hourly or salaried, gross wages are determined before any deductions or deferments (i.e. 401k deferrals). If you earned your wages in Solon, multiply your gross wage figure by 2% (.02). The result of this computation should equal the local tax that was withheld from your wages. If you find that the correct local tax is not being withheld, you need to contact your employer to have it adjusted. Although your employer is legally responsible for withholding the correct tax and paying that tax to the city where your wages were earned, the tax being imposed upon your wages is such that you have the final responsibility to ensure that your full tax obligation is being paid.
[top]I have income in addition to that reported on my W-2 from my employer. Can my employer withhold additional tax above the local rate to cover this tax liability?
No. An employer's withholding tax is not deposited into individual employee accounts, but into the employer's master account. The total tax withheld from all employees is then reconciled with the total local wages earned by said employees. Because all employer withholding accounts are required to reconcile the total tax withheld from all employees with the total local wages earned by all employees, withholding by employers in excess of the required tax rate is not permitted. Also as a result of the need to reconcile tax withheld to wages earned, any refund of tax that has been incorrectly over-withheld by the employer is issued directly to the employer, not the employee.
[top]An extension extends the time limit for filing a return. Extension requests are no longer pre-approved by the Tax Division. Be sure to attach a copy of your Federal Extension Request to your Solon Income Tax Return. Your extension will be approved as long as your tax account is not delinquent in any manner. The extended due date is the last day of the month following the extension month approved by the IRS.
Filing an extension with us does NOT relieve you of the responsibility of making payment of the anticipated tax due by the original due date.
Unless there are unique circumstances (which we will determine 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.
[top]A declaration of estimated income tax should be filed by all individuals who can reasonably expect to owe Solon income tax of $40 or more at year's end. Estimated tax payments must be made on a quarterly basis as follows: a minimum of one-fourth (1/4) on or by April 15, July 15, October 15 and January 15.
Solon’s regulations are similar to those of the IRS. To avoid penalty and interest assessments for underpayment of estimated taxes, we require that at least 90% of the final tax due Solon, or 100% of the prior year liability, be remitted to us in four equal quarterly installments
[top]Is it possible to amend my estimate during the year?
Yes. Just notify us of your intentions.
[top]What if I reside in Solon and work in an area with no municipal tax. How often must I file an estimate with Solon?
You must file a Declaration of Estimated Taxes by April 15th of each year if the estimate of tax that will not be withheld exceeds forty dollars ($40). On this form you must estimate the amount of tax you will owe for the year. One-fourth of the estimate must be paid with the Solon tax return. Subsequent payments are due July 15th and October 15th of the current year, and January 15th of the following year.
[top]I am a Solon resident whose employer does not have a presence in Solon. What if my employer does not withhold the Solon tax for me?
You should make estimated payments to Solon (your city of residence) in order to satisfy your total local tax obligation. Estimated payments are due on the 15th of April, the 15th of July, October and then January of the following year. You'll also need to file an individual tax return on or before April 15th of year following the year your wages are earned to report your final tax liability for that year. Your final liability is reduced by your estimated payments and you pay any remaining tax with your return. If your estimated payments exceed your final tax liability, you may claim a refund or credit carry-forward to your next year's return.
[top]I work in a city that has a 1% local tax rate and I reside in Solon which has a 2% local tax rate, yet my employer only withheld local taxes to my city of employment. How do I meet my 2% total local tax obligation to my city of residence?
You may request that your employer withhold an additional 1% in local tax to your city of residence. The 1% tax due your city of residence is known as an alternate tax due as a result of working in a city that has a tax rate that is less than the tax rate of your residence city. Your employer is not required to withhold the alternate tax. However, many employers will withhold the alternate tax due to your city of residence if you so request. This is also known as a courtesy withholding. Your employer may contact the Tax Division if they have any questions.
[top]I am retired. My only income is from Social Security, pensions, interest and dividends. Am I required to file a City of Solon Income Tax Return?
No. You are not required to file an income tax return with Solon, nor are you taxed by Solon on these types of income. However, you must notify the Tax Division so that we can inactivate your account and not send you income tax returns in future years.
[top]If an individual files late, is there a penalty?
Yes. The penalty rate is 1.5% per month or fraction thereof. There is also an interest assessment of 1.5% per month or fraction thereof for late payments.
[top]What if I file timely but do not include payment with my return?
Taxpayers who file a return timely but do not include payment with the return will be assessed penalty and interest up to the time the payment is made. When a taxpayer can demonstrate that he or she is financially unable to meet their tax obligation, it is possible to arrange a payment plan. This is at the discretion of the Tax Division. Therefore, it is to the taxpayer's benefit that payment arrangements be finalized by the due date of the return. Please contact us if you feel that you qualify for this alternative.
[top]I owe city taxes but I am unable to pay my full liability at the time my return is due. Should I still file my return?
Yes, you should file your return by the due date whether or not you are able to pay the entire amount of tax that you owe. You will receive a bill for the unpaid taxes along with late payment penalty and interest charges. The telephone number for our Delinquent Section will appear on the invoice so that you may contact us to arrange for payment of the charges still outstanding.
[top]Can I receive assistance in preparing my City of Solon Income Tax Return?
Yes, and the help is free. Tax Division personnel can assist you by telephone, mail, or in person. We have personnel available from 8:00 a.m. to 4:00 p.m. Monday through Friday (and Saturday mornings during tax season) who will review your records and prepare your City of Solon return for you at no cost. Please note that we will prepare only your individual city return (not federal or state or for any other city). If you visit the Tax Office please bring a copy of your Federal Income Tax Return and all W-2's and 1099's for wages. These will help us assist you in preparing your Solon Tax Return.
If you just have a question or two you need answered, call us at (440) 349-6310 during regular business hours. We guarantee that you'll be able to talk to a real live person.
If you want help with your Federal or State returns, contact the IRS at 1-800-829-1040 or the Ohio Department of Taxation at 1-800-282-1780.
[top]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.
Also, on Schedule E the addresses of the rental properties and names of the renters are necessary data but are sometimes missing. Finally, this schedule needs to accompany the Solon tax return even if a loss is shown.
[top]I'm starting a business. What do I need to know about city taxes?
You will normally have to remit two types of city taxes: the net profits tax and (if you have employees) the employee withholding tax.
The first is the tax due on profits of your business, whether your business is a sole proprietorship, corporation or partnership. Please remember that Solon taxes the net profits earned within each city by S Corporations at the corporate level. Sole proprietorships file by reporting their federal Schedule C income on the proprietor's individual city return.
To remit the second type of tax, the tax withheld from your employees' wages, you will need to establish a withholding account with us. You do this by filing a Form S-941 or S-W3, both of which are available online at the City website, or from the Tax Office (440) 349-6310. Employers are liable for all city withholding taxes that should have been withheld from their employee's wages even if those taxes were not, in fact, withheld. Because of this obligation, you'll want to make sure you set-up your employer withholding account as soon as you hire employees
[top]I'm self-employed but my business has not shown a profit. Am I required to file a return?
Yes, all residents conducting a business or non-residents conducting a business within the city must file an annual return and report the net profits or net losses of said business. Please note that the leasing of real or tangible property (i.e. income from a rental property) owned by you is considered a taxable business activity that must be reported. Also, losses may be carried forward for 5 years to offset future profits and thereby reduce the tax on your entity’s future profits.
[top]I'm a partner in a partnership and a Solon resident. Do I owe Solon tax on my income from the partnership?
Yes, a Solon resident is taxed on his or her share of all income earned by partnerships (wherever located) in which he or she is a partner. However, full credit (up to the 2% Solon limit) is given for all city income tax that was paid to the city or cities in which the income was earned, whether that tax was paid by the partnership as an entity or by you as an individual partner.
[top]I'm serving in a fiduciary capacity. What is my responsibility for filing?
Trusts and estates conducting business within the City are required to file a Solon Municipal Income Tax Return (i.e., a business return) and report, at the entity level, all net profits or losses earned or incurred as a result of business activity conducted within Solon. Tax is due on the net profits reported as earned in the City. Because the tax is paid at the entity level of the trust or estate, beneficiaries are not required to pay city tax on income derived from trusts or estates.
[top]What is Federal Form 2106/2106EZ?
Federal Forms 2106 and 2106EZ are used by employees to deduct job-related, ordinary and necessary business expenses, which were not reimbursed by their employer, from W-2 wages or salaries earned within the City of Solon. In order to deduct these expenses on your Solon City Income Tax return, a copy of Federal Schedule A, Form 1040 must be attached to the Solon Tax return. If Schedule A is not attached, the deduction will not be allowed. For municipal income tax purposes, this deduction is limited to unreimbursed employee business expenses less 2% of Federal Adjusted Gross Income.
[top]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.
[top]How do I handle Early Retirement - Separation Payouts?
Regardless of the terminology assigned to the payout (e.g. retirement incentive, separation pay, termination pay, etc.) the payout is taxable if the recipient was employed within the City of Solon at the time of retirement. The residence of the individual at the time of the payout has no bearing on the taxability of the payout. 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%.
[top]How do I handle Lump Sum Distributions?
Lump sum distributions made from qualified pension and profit-sharing trusts, and not made pursuant to an employee's retirement, are taxable.
[top]The municipal income tax imposed on a resident S Corporation is on the entity rather than the individual member. In the case of a non-resident S Corporation, the distributed share of income is taxable to a Solon resident owner who may take credit for any municipal or JEDD income tax that is paid by the S Corporation.
[top]What is an Independent Contractor?
Many individuals claim to be operating as independent contractors, and some employers have classified certain employees as independent contractors. However, in some instances we have determined that these are misclassifications. We follow the federal guidelines as to determining "independent contractor" status.
[top]What must I do if I am a contractor?
All contractors must be registered with the City's Building Department before performing work in Solon. All contractors should also be registered with the City's Tax Division before performing work within the City. This is easily done by downloading the Business Questionnaire from the “Income Tax Forms” option on the City website and email, fax (440-349-6320) or “snail mail” it to us at Tax Division, City of Solon, 34200 Bainbridge Rd, Solon, OH 44139-2955.
[top]What do I do with a Form 1099?
It is a requirement of the Tax Division that copies of 1099's (for other than interest or dividend payments) be submitted by both the payer and the recipient of those 1099’s.
[top]Gambling winnings, including lottery winnings, are taxable to the City of Solon. Gambling losses are not deductible against gambling winnings. Gambling losses are not deductible against any other taxable income.
top]Real Estate and Insurance Sales
Agents who work in real estate or insurance, whose employer's or broker's office is located in Solon must pay Solon's income tax on all commissions earned, regardless of the location of the property sold or point-of-sale of insurance. This applies to Solon residents and nonresident salespersons alike, whether employees or self-employed.
[top]What are the top 10 mistakes people make in filing a tax return?
10. Failure to sign return or attach check.
9. Failure to file estimate.
8. Failure to advise Tax Division of address changes.
7. Failure to file return for the year taxpayer moves in or out.
6. Failure to allocate taxes paid when allocating income for move-in/ move-out year.
5. Failure to pay 2nd, 3rd and 4th quarter estimated tax payments.
4. Failure to mail return.
3. Failure to attach Schedules/Forms and statements.
2. Failure to attach W-2.
1. Failure to use gross compensation.
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