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How COVID emergency measures could cost you, clients’ money

Written on Apr 8, 2021

OSCPA shared the following column with news media across the state because taxpayers need to act now to potentially save money. You can also print and share this fact sheet with clients and affected taxpayers you know

By Scott Wiley, CAE, OSCPA president & CEO 

The concept of working remotely has surged alongside of COVID-19 during the past year. What was once a luxury enjoyed by some, became a requirement for many because of the pandemic. But working from home is supposed to save – not cost – you money, right? 

As the virus was rapidly spreading last year, Gov. Mike DeWine and state legislators swiftly adopted numerous policies designed to protect the health of Ohioans, help businesses stay afloat, support struggling public entities and keep people employed. The crisis required much of Ohio’s workforce to convert to a remote work situation. To relieve employers of the looming administrative nightmare of rapidly withholding employee municipal income tax to potentially dozens of different cities and villages, the Legislature and Governor adopted a temporary law change (Sec. 29 of H.B. 197) allowing employers to keep withholding to the office location until 30 days after the Governor’s State of Emergency order ended. 

Scott Wiley smiling for the camera.

Few expected that a year later the State of Emergency order would still be in place. Making matters worse is numerous Ohio cities are erroneously taking the position that the temporary law means municipalities can permanently keep all those payroll withholding dollars from workers who neither live nor work in their city – often to the detriment of the bedroom communities where the employees are actually living and working. 

As Ohioans are filing their 2020 individual tax returns, many remote workers may be entitled to request a municipal income tax refund, despite assertions from some cities that they do not intend to provide such refunds. CPAs are trusted financial advisers to businesses and individuals across the Buckeye state and, as such, we take seriously our responsibility to educate Ohioans about laws and policies that may benefit, or even threaten, their financial health and wellbeing. 

The constitutionality of both the withholding and refund issues is now being deliberated in Ohio courts. Despite what many cities have said, prior Ohio Supreme Court cases assert just because the money has been withheld to a municipality does not mean that municipality is entitled to keep it. 

While the outcome of the current litigation is uncertain, OSCPA’s tax experts are certain that the law change was intended to be a temporary withholding provision of convenience; not a statement about the location of where the tax is ultimately due. Another reality: only those remote workers who take the step of filing an income tax refund request can potentially get a refund, even though they might have to wait to receive it until the courts have ruled on the cases. 

Ohio taxpayers take note: If you worked remotely for all or part of 2020, you should talk with your CPA to see if it is worthwhile for you to file a municipal income tax refund claim. Do not be dissuaded from filing a refund request because of a city’s posturing about not giving refunds, or by statements from Regional Income Tax Agency (RITA) cities about putting refund requests in “suspended status” until the courts have ruled. 

You may potentially benefit from a refund if you had municipal tax withheld to a city where you were not physically working or living, but you have been working in your resident city or village with a lower tax rate, or a township that does not tax personal income. Those taxpayers who live and work from home in townships, in particular, could be looking at a significant refund check. 

This issue comes down to one simple reality: Ohio taxpayers who did not work or live in a municipality should not have their withheld income kept by that municipality. State leaders should clarify Sec. 29 of H.B. 197 through currently pending legislation and ensure Ohioans can keep their hard-earned money if they are due a refund. As we emerge from the negative impacts of COVID, it’s more important than ever to advance our economic recovery by putting dollars back into the pockets of hard-working Ohioans who earned them. 

To assist members in educating their clients about the potential opportunity to obtain a municipal income tax refund, OSCPA has created a document you can share in your own outreach.