The COVID-19 pandemic changed a lot of things—including taxes paid to the municipalities where many Ohio businesses are located.
At the outset of the pandemic, the virus drove employees home as remote work became a means to slow the spread of the virus. In March 2020, the Ohio legislature passed House Bill 197, a temporary work-around measure intended for employees who might or might not be working in different municipalities. The law allowed municipalities to collect withholding from employees based on the original location of their office—even if they became remote workers.
The temporary measure was extended to the end of 2021 and revised to allow employees to pay municipal taxes based on the municipality where the remote work was taking place, or the municipality of the original office location. As of January 1, 2022, the original law was restored. Employers are required to track the municipalities where an employee works for more than 20 days.
Agencies responsible for responding to the changing regulations include Cleveland’s Central Collection Agency and the Ohio Regional Tax Agency (RITA). Legal counsel for RITA, Amy Arrighi notes, “The law basically says the tax is due where the work is done.” For some taxpayers, the back and forth about state withholding has become a payroll tax dispute—exactly what refunds are owed and from where?
By Tax Day (April 18) this year, the Central Collection agency had issued 692 refunds with more than 3,000 left to process. At the same time, RITA had processed 374 refunds with 1,639 in the queue. Many of these refunds were related to remote work. Taxpayers who paid taxes to a municipality in which they did not work in the previous year are eligible for a refund of those taxes paid. It is worth noting only those residing and working in municipalities with low or no tax requirement will see any largesse from a refund—given the need to pay in their home city.
Beyond the withholding issue, cities are eyeing the trend toward remote work with concern. Said Arrighi, “Municipalities of all sizes are concerned about how this might shake out. If you think about a small municipality with one large employer that drives their tax dollars and suddenly sends everyone home or has them at home part of the time, that could have an impact. It’s not just a big city issue.”
For Ohio business owners, employees, tax agencies, and municipalities, it remains to be seen if urban growth is sustainable given the potential permanent migration of some workers to remote-based work.
Speak with a skilled tax attorney today in Cleveland today
Serving local and international clients from offices in Chicago and Cleveland, the tax group at Robert J. Fedor, Esq., LLC helps you respond strategically to questions about IRS audits, employment tax disputes, or allegations surrounding fraudulent tax returns. Call 800-579-0997 or contact us today.
