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The continued impact of remote work on municipal income tax
Written on Jun 29, 2023
By Jessica Salerno-Shumaker, OSCPA senior content manager
The popularity of hybrid work schedules means employers and individual taxpayers alike continue to ask questions about what it means for municipal income tax.
“We still get a lot of questions asking, ‘How do I withhold if I have people working part of the time at home and part of the time in the office?’” said Amy Arrighi, executive director at the Regional Income Tax Agency (RITA). If you have not already seen it, the Ohio Society of CPAs created a municipal income tax withholding guide with FAQs that can be downloaded here.
Arrighi will present a session at the September CORECon Core Skills Conference where she will cover the impact that remote work is having on municipal income tax and trends to watch in the near future.
Many employers are experiencing frustration over how to handle municipal net profit tax filing as a business, Arrighi said.
“For example, if you are an employer and have employees working at home and they have company computers and printers, then the employee has company property in their own home,” she said. “And if those employees are providing services for which the employer is being paid, the employer could have sales that they have to allocate to the city or village where their employee works from home. If they have property there, they might have nexus in that location as well.”
Individual taxpayers need to be aware of changing their own withholding, she said. While many of her withholding discussions focus on the employer, employees need to know how hybrid work changes their withholding as well.
RITA is keeping an eye on upcoming legislative changes, Arrighi said, and the OSCPA-supported House Bill 121, which allows businesses with remote and hybrid employees or owners to elect to use a modified apportionment formula, is an “important one we’re watching.” She also mentioned OSCPA-supported House Bill 105, which would reduce late filing penalties and a provision in the budget bill that would exclude all taxpayers under the age of 18 from paying municipal income tax.
“It’s important to understand any legislation that's been passed, especially in the budget bill, and how that could change things for the coming tax filing season,” Arrighi said. “Not only for individual taxpayers, but for businesses as well in terms of filing net profit returns.”