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Understanding Ohio Local Tax Obligations

Local Tax PuzzleYou may feel like your dental practice has to pay taxes left and right, up and down and inside and out. Whether it’s federal, state, payroll, real estate, unemployment, commercial activity, sales, use or any other tax out there – your tax liability can really add up. And local taxes make up a nice piece of your tax pie.

If you own a dental practice in Ohio, your practice is responsible for paying your local taxing agencies, which may include multiple taxing authorities. Ohio is one of the few states in the country that assesses local taxes.

Here’s a look at the various local taxes you and your practice will owe local Ohio municipalities. 

Individual Local Taxes

Not only do your employees remit taxes to the city in which your dental practice is located, so do you if you receive a paycheck. But local tax payments can be rather complex. You see, if you or your employees work at multiple locations, wages need to be allocated based on the time spent in each office. If one of the locations is in a township or another non-taxable location, this allocation becomes even more important so you don’t pay more taxes than you have to.

After you and your employees have paid all of your city taxes based on where you work, you will then reconcile this on your local tax return and possibly pay additional taxes to the city in which you live. Most, but not all, local taxing agencies give you credit for taxes paid where you work. This is good because you don’t have to pay 100 percent taxes to both the city where you live the one where you work. Each residence city tax credit is different based on their own tax rules, so be sure you are getting the credit that you deserve. 

Local Taxes for Your Practice

City taxes are also paid on your dental practice’s profit. If you have profit at the end of the year, the city in which your practice is located may assess taxes. And for those dentists with more than one location, profit will need to be allocated based on four factors:

  • Sales
  • Property
  • Rent
  • Payroll

In order to properly allocate taxes, it is important that you are able to track each of these categories by location.

Any net loss will be allocated based on these same factors and will likely be carried forward. Most cities allow losses to be carried forward for five years, but this also varies by local taxing agency.

Local Tax Enforcement on the Rise

Most cities in Ohio are handled by the Regional Income Tax Agency (RITA) or the Central Collection Agency (CCA), but some cities and villages assess and collect the taxes themselves. In the past five years, the local taxing agencies have become very aggressive with sending tax notices at any chance they get. 

Contact Our Dental Practice Professionals

If you receive a tax notice, be sure to contact Rea & Associates before paying the balance. Our team of bright dental CPAs will review your taxes to ensure payment is actually due. Oftentimes it may just require additional documentation in lieu of payment. You pay enough taxes as it is, so don’t get stuck paying more than you need to our local taxing agencies.

Related Articles:

Estate Tax Increases Could Decay Your Future Plans

Schedule a Check-Up with Your Tax Accountant

Tax Planning – Not A Once-A-Year Event

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Rea & Associates, Inc. | Bright Dental CPAs | 7201 Center St, Mentor, Ohio 44060-4858
phone + 440-266-0077