This is Part 2 of a 2-part series by contributing columnist Allen “Al” Beatty, Assistant Professor of Accounting at Wilmington College.
You may recall in the middle of the tax season last year the American Rescue Plan Act was passed that excluded $10,200 in unemployment benefits for most taxpayers. This created many problems occurring in the middle of the tax season. For starters, many people already filed. Furthermore, states were not sure how to handle. Ohio did eventually come around to agreeing to this provision. However, the issue was still open for those who already filed.
From what I have seen the IRS has automatically issued refunds to those taxpayers over the summer. However, for Ohio it is not automatic. You must file an amended 2020 return showing proof of the IRS refund such as the IRS notice and a bank deposit showing the refund should you have it. Amended returns, can take many months. So, please don’t expect a quick turnaround on those!
Local Income Tax Issues
One taxing aspect of COVID that doesn’t make the news is regarding local taxes. Many people spent most, if not all of their working days, at home in 2020 and 2021. In some cases they are not going back to the “office in the city.” Perhaps where they live doesn’t have a tax or the tax is lower than the city. This has caused many frustrations with taxpayers paying to the city of employment such as Dayton, Cincinnati, Columbus, etc. when very little if any time was spent at their main place of employment. The Ohio legislature was reluctant to force employers to adjust withholdings for the various scenarios. Thus, in 2020 if you filed for a refund from the city of employment you have probably not received a refund because the cities are waiting to see how the court cases will be resolved. It is expected that once the Ohio Supreme Court rules then refunds will be issued—if the rulings are in favor of the taxpayer and a taxpayer filed a tax return to the city of employment. There is generally a statute of limitations for tax returns. Thus, you should file returns with the cities ASAP. For 2021 it is expected that if you file a return with the city of employment if you worked at home, you will be issued a refund. However, expect delays and expect documentation to be required from your employer. The cities will not release the
funds so quickly! Also, keep in mind that what you save in taxes for Dayton, for example, may need to be turned around to your home city such as Wilmington. The question needs to be asked if it is worth your time for the paperwork? If the tax rates, are vastly different yes! Also, if you live in the county or a municipality that doesn’t have an income tax this may help as well.
As for 2022 and forward the Ohio legislature has passed a law, which Governor DeWine signed, that employers must withhold for your hometown when working from home and for the city of employment (permanent office) when in those days. With today’s hybrid work environment this can be very cumbersome for everyone.
It should be noted the major cities of Ohio will lose at least $100 million a year with this changing environment. There is a lot of talk in Columbus and elsewhere how to assist these cities. Stay tuned on this issue.
This article covers the highlights of what we are seeing in our tax clinic at Wilmington College. Other tax provisions may apply to you. If your Adjusted Gross Income is $58,000 or less, you may qualify for the free services by our students. Please call 937-481-2296 to leave a message. You may also e-mail [email protected]
You should consult your tax professional for how these provisions apply directly to your situation.
Allen “Al” Beatty, EA, CPA, MT is an Assistant Professor of Accounting at Wilmington College.