Ohio’s Municipal Payroll Withholding Dilemma
Mar 29, 2021
The concept of remote working was quickly embraced last year as we witnessed states all across the nation implement lockdown orders as a result of the COVID-19 pandemic. Even here in Ohio, Governor DeWine instituted stay-at-home orders resulting in thousands of Ohio workers clocking in their 40-hour workweek from their home office. What was thought to be a several-month solution has now turned into over a year or more of remote working. The end result – a municipal income tax withholding dispute between the state, cities, and taxpayers.
Why the dispute?
During the government-imposed lockdown, Ohio lawmakers adopted a temporary law change allowing employers to keep withholding to the office location until 30 days after the Governor’s State of Emergency order ended. This was intended to relieve the burden on the employer of tracking withholdings for their employees throughout various cities and villages from which they were working remotely. Now, over a year later, some Ohio cities are interpreting the temporary law to mean municipalities can permanently retain those withholding dollars from workers who neither live nor work in their city.
What does this mean?
Several Ohio taxpayers have brought this debate to Ohio courts to determine the constitutionality of the temporary COVID-19 municipal income tax law. The court case was filed in July 2020 and is still in its early stages. (The Buckeye Institute v. City of Columbus Auditor, 20 CV 004301, Franklin County Common Pleas Court)
What should I do?
If you are an Ohio taxpayer who worked some or all of 2020 remotely, you should connect with your accounting advisor to determine if you should be filing City Non-resident Refund Claims (NRR). NRRs have always been available for individuals who have tax withheld by their employer for days they do not work in the city. Please note, if you are able to receive a refund of the tax withheld for your workplace city/village, you will likely owe that tax, or some portion of it to your residence community if that community has a tax.