Before submitting the 2020 tax year returns for local taxes, there are important changes that may possibly affect those residents who work outside the city. The Regional Income Tax Agency (RITA) recently announced changes, which relate to COVID-19.
The change involves those North Royalton residents who work outside the city. Last year, when COVID-19 began, many employees started working from home. Those employees may be able to request a refund on the taxes withheld from the city where their employer is located. This scenario is the result of a pending lawsuit, filed by the Buckeye Institute against the City of Columbus and Ohio Attorney General Dave Yost. The suit asks to invalidate a state law that was approved by the Ohio legislature in March, that allows taxes to be collected from the employer’s location during the pandemic, even though the work was performed either at the home of the employee, or elsewhere. The suit states that it is illegal to tax in a location where the employee does not work or live. North Royalton Finance Director, Eric Dean, pointed out that only on the income earned in North Royalton, not the full income is in question. “It would be only that during the time worked in North Royalton,” he said.
As an example, someone who lives in North Royalton, but works in a city where the income tax rate is 2.5%, would pay that 2.5%, plus an additional .75% to North Royalton, totaling 3.25%. If they worked at home for a portion of 2020, they would only pay the entire 3.25% of the amount earned for the time they worked at that location. During the time they worked at home, they would only pay 2% to the City of North Royalton, which would save them 1.25%. That savings potentially could be refunded, if the law suit is successful. If so, some could see a savings of up to $700, dependent upon the amount of income made and the difference in income tax rates between the two cities involved. “I think there’s a really good chance that they would get a refund,” said Dean. The resident can potentially benefit, as well as the City of North Royalton. Dean said that “in an estimate from RITA, if 10% of North Royalton residents were affected, we would see an increase of about $390,000-$400,000 in revenue.”
RITA officials note that “a refund of the tax withheld for your pre-COVID-19 work municipality, while you worked from home or another location, may not be available until litigation over this issue is completed.” They went on to say that “should the conclusion of this litigation determine that a refund is allowed, your request for refund will be processed at that time. Should the conclusion of the litigation determine that a refund is not allowed, you will receive a notice that a refund is not available to you.”
For those residents who wish to participate, the refund paperwork is on Form 10A posted on the RITA website, ritaohio.com. Note that on the form 10A, there is a section that calculates the days worked at home. There also is a section where the employer must certify the information and sign it. The special circumstances regarding COVID have just recently been added. When filing this form, the resident would choose the option that is related to COVID, which states: “Due to COVID-19, days worked outside of municipality for which the employer withheld tax. Attach a copy of your W-2 Form, a completed Log of Days Out Worksheet on page 3, and a completed Calculation for Days Worked Out of RITA on page 3. Your employer must complete and sign the Employer Certification Parts 1 and 2 on page 2. The availability of a refund is dependent upon the outcome of pending litigation. Requests will be held until this litigation is resolved.”
North Royalton Law Director, Tom Kelly said that it is “entirely likely that the case is not going to be decided in the trial court.” He said he felt that it would then go to the Court of Appeals at the very least and maybe to the Supreme Court.
By GLORIA PLEVA KACIK
Contributing Writer