Special Edition – Oct. 27, 2006 (Tax Reciprocity and Local Tax Withholding)

This is the second in a series of e-Inside Special Editions to communicate several changes affecting faculty and staff that will begin on Jan. 1, 2007. The changes are associated with the initial rollout of Project K.E.Y.S., the Enterprise Resource Planning (ERP) initiative to integrate the university’s business processes through a collection of software applications.

At Kent State this will include the business processes of human resource management, financial management, student services and sponsored programs, services, advancement and administration. The Human Resources-based processes are the first to convert to Banner (the name of the ERP application being used at Kent State), effective Jan. 1.

With the start of the migration to Banner, many Kent State employees will see a change in the way local taxes are withheld from their paychecks beginning in January.

Local Tax Reciprocity

Local tax reciprocity is the mutual exchange of specific privileges between two taxing entities. In lay terms, it means the local taxing entity where you live gives you credit for all or part of the amount of local taxes you pay at work.

Currently, the university utilizes a “reciprocity” practice in withholding local taxes from employee paychecks. This practice requires that Kent State track and remit tax payments to more than150 municipalities. This is a manual process that requires extensive research by staff to keep the rates up-to-date. With implementation of the new Banner/ERP system, the university will no longer be able to continue this service. Employees will assume responsibility for monitoring and ensuring payment of appropriate municipal taxes on their own.

Beginning Jan. 1, the university will withhold taxes only for the employee’s work location, not for the employee’s city of residence. The employee will then be responsible for any additional taxes required by the city in which he or she resides.

For employees who reside and work in the same city or live in an area that does not have a local tax, this new practice does not represent a change in what they will see or how their taxes will be withheld.

The following table illustrates some examples of those employees who may be affected by this change:

Examples of reciprocity: current policy and new policy

If you work at this campus, with tax rate:

And you live in this city, with tax rate:

And the tax credit (reciprocity) for the city you live in is this:

Current practice - Kent State withholds:

As of Jan. 1, Kent State will withhold:

You will be responsible for paying directly:

Kent Campus,
Kent , 2.0%

Akron, 2.25%

100%

2.0% for city of Kent, .25% for Akron 

2.0% for city of Kent

0.25% to Akron

Tuscarawas Campus, New Philadelphia, 1.0%

Reminderville, 1.5%

0%

1.0% for New Philadelphia, 1.5% for Reminderville

1.0% for New Philadelphia

1.5% to Reminderville

Kent Campus, Kent, 2.0%

Warrensville Heights, 2.0%

50% credit

2.0% for the city of Kent and 1% for Warrensville Heights

2.0% for city of Kent

1.0% to Warrensville Heights

Stark Campus, Jackson Township, 0%

North Canton, 1.5%

N/A

Send 1.5% to North Canton

0% for North Canton

1.5% to North Canton

What You Need to Do

This change, which begins Jan. 1, 2007, affects many employees throughout Kent State’s eight campuses. Here are some things you can do to make the transition easier:

  • Determine which local taxes are currently withheld from your paycheck;
  • Contact the local tax office where you reside;
  • Ask the local tax office about reciprocity and its specific tax information;
  • Determine the reporting requirements for where you reside (i.e., payment schedule for estimated taxes); and
  • Consult your tax advisor.

For questions or additional information, please send an e-mail to erp@kent.edu. Next week’s e-Inside Special Edition will explain changes in how employees report and view vacation and sick leave.

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