Ohio’s Corporate Income Tax: A Comprehensive Guide for Business Owners
December 27, 2022
peakreliance
Accounting, Bookkeeping, Taxes
Ohio’s corporate income tax can be a complex topic, but it’s important for all business owners to stay informed and up to date. With the new year quickly approaching, now is the perfect time to review Ohio’s corporate income tax laws and regulations. Understanding Ohio’s corporate income tax can be beneficial for businesses of all sizes, and it’s important to know what exemptions and deductions are available. This guide will provide an overview of the Ohio corporate income tax, including the corporate tax rate, filing requirements, and how to calculate taxes. Whether you are a small business owner or responsible for taxes for a large corporation, this guide can help you understand the nuances of Ohio’s corporate income tax laws and ensure your business is compliant.
Overview of the Ohio Corporate Income Tax
The Ohio corporate income tax is a state tax on businesses that earn income in Ohio. The corporate income tax is one of the most common business taxes in the United States. State corporate income taxes are imposed at various rates, and they are due on a semi-annual basis. Many states have changed their corporate income tax rates over the last few years as part of their yearly budget processes. Most recently, in October, Ohio’s corporate income tax rate was reduced from 4.33 percent to 2.75 percent. This reduction was part of a budget plan to generate additional tax revenue. Ohio’s corporate income tax is imposed on all domestic and foreign corporations that have a taxable income in Ohio. The taxable income is based on the federal taxable income, but there are some modifications. There are also special computations for insurance companies, financial institutions, and railroads. Corporations that have been assessed a tax under Chapter 5739 are also subject to the corporate income tax.
Corporate Tax Rate
The corporate tax rate in Ohio is 2.75 percent for calendar year 2022. This is significantly lower than the rate taxpayers paid at the beginning of the year, and the rate that owners paid in previous years. Ohio’s corporate income tax rates have changed a few times over the last several years, and the new rate of 2.75 percent is subject to change as well. Although it is unclear whether the corporate tax rate will be changed again, it is important to understand the rate each year. The 2.75 percent rate will remain in effect until July 2021. After that, the rate may be updated or changed.
Filing Requirements
The corporate income tax filing requirements depend on the amount of taxable income your business earns in Ohio. Corporations that earn $300,000 or less in taxable income will have to file the Ohio IT-330, the Ohio IT-331, and the Ohio IT-332. Corporations that earn more than $300,000 in taxable income will have to file Ohio IT-330, Ohio IT-331, and Ohio IT-332 as well as Ohio IT-333. Corporations that earn more than $10 million in taxable income will have to file Ohio IT-330, Ohio IT-331, Ohio IT-332, and Ohio IT-333 as well as Ohio IT-1188. Corporations that earn less than $10 million in taxable income will not have to file Ohio IT-1188. If you are unsure what filing requirements apply to your business, a tax preparer can help.
Calculating Taxes
The amount of corporate income tax you owe for the year is calculated by multiplying the taxable income by the rate that applies to your business. Note that the taxable income is based on the federal taxable income. Corporations that earn less than $300,000 in taxable income will have to pay taxes based on the Ohio tax rate of 2.75 percent. If you earn more than $300,000 in taxable income, you will pay taxes based on the Ohio tax rate of 2.75 percent plus the surcharge that applies to your industry. The surcharge is an additional tax that is imposed on corporations in a particular industry.
There are four different surcharges based on the industry your business falls under.
- Manufacturing surcharge (1.25 percent)
- Natural gas surcharge (0.4 percent)
- Health care surcharge (1.25 percent)
- Financial services surcharge (1.25 percent)
Exemptions and Deductions
In addition to the standard deductions and exemptions, the Ohio corporate income tax allows businesses to claim a number of credits. Businesses can claim a credit for the carbon dioxide emissions created by the business. The businesses can claim this credit on an annual basis, and the amount is based on the amount of carbon dioxide emitted. Another notable exemption is related to energy credits. Businesses can claim a credit for the amount they spend on energy efficiency, renewable energy, and/or carbon dioxide reduction projects. Alternative fuel suppliers can also claim a credit for the amount they spend on ethanol or methanol production facilities. Other credits and exemptions that may apply to your business include research and development credits and the Ohio Job Creation Tax Credit. The Ohio Job Creation Tax Credit is a refundable credit that was implemented to benefit businesses that create new jobs in Ohio.
Tax Credits
In addition to the exemptions and deductions, businesses can claim credits against the amount of taxes they owe. Credits can help lower the amount of taxes a business owes, and some credits are refundable. The Ohio Job Creation Tax Credit is a refundable credit, which means it can reduce the amount a business owes in taxes to zero. The Alternative Fuels Tax Credit is another notable tax credit for businesses in Ohio. This credit is available to businesses that purchase alternative fuels, such as propane, natural gas, and electricity obtained from renewable energy sources. The size of the credit depends on the type of fuel purchased and the amount of fuel purchased.
Payment Options
Ohio’s corporate income tax is due at the end of the year. The deadline for the second quarterly installment is the last day of February, the third is the last day of August, and the fourth is the last day of December. Corporations that earn more than $10 million in taxable income will have to pay the tax quarterly. Corporations that earn less than $10 million can choose to pay their tax quarterly or annually. The minimum amount that corporations will have to pay as a quarterly installment is $50. If you can’t pay the full amount at once, there are a few payment options available. You can use a credit card, personal check, or money order. Alternatively, if you are unable to pay the full amount, you can consider filing for an installment agreement.
Resources for Businesses
Keeping up with Ohio’s corporate income tax laws can be difficult, even for business owners that are fluent in tax law. To make it easier, The Ohio Department of Taxation has created resources to help business owners understand their taxes. These resources can help you understand everything from filing your taxes to calculating your taxes. The resources can also help provide answers to frequently asked questions. The Ohio Department of Taxation’s online resources are a great way to keep up with the latest tax laws, such as the new corporate tax rate. The Ohio Department of Taxation also has a selection of publications for businesses. Publications are useful for quick reference materials, and they can help you stay informed and up to date with tax laws. Publications are available in both paper and digital formats.
Penalties for Non-Compliance
The penalties for non-compliance with Ohio’s corporate income tax laws are based on the amount of taxes a business owes.
The penalties are as follows:
- If a business owes less than $2,500, the penalty is 5 percent of the amount owed.
- If a business owes $2,500 or more but less than $25,000, the penalty is 10 percent of the amount owed.
- If a business owes $25,000 or more, the penalty is 15 percent of the amount owed.
Conclusion
In conclusion, Ohio’s corporate income tax is an important topic for business owners to stay informed about. Understanding the laws and regulations surrounding this tax can help businesses of all sizes stay compliant in the new year. By reviewing the corporate tax rate, filing requirements, and how to calculate taxes, businesses can be prepared to pay the correct amount of corporate income tax in Ohio. Whether you are a small business owner or responsible for taxes for a large corporation, this guide can help you navigate the complexities of Ohio’s corporate income tax laws and ensure your business is in compliance for 2022.
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Corporate income tax, Ohio
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