Currently Ohio employees are classified as working from their employer's principal place of business for tax purposes, even if they are actually working from home.
Last March Ohio passed House Bill 197. Among the various pandemic emergency measures, the bill temporarily suspends the state's "20-day rule," which requires employers to begin withholding tax for a municipality when an employee has been working in that municipality for more than 20 days.The suspension of the 20-day rule was intended to make it easier for employers by allowing them to withhold the same local income tax location and rate that they had been withholding prior to the pandemic.
Now the question is, are an employee’s wages considered to be earned at the employer’s location, even when they worked remotely from home?
Although we do not have an answer currently, there are protections under the United States Constitution that prohibit states and local governments from imposing taxes on nonresidents if their income was not earned in their state or locality. In addition, there are two bills pending before Ohio Legislature and a lawsuit filed in Franklin County Common Pleas Court to immediately repeal the 20-day rule suspension.
In the meantime, while we wait for an outcome of the pending legislation and the pending Franklin County Common Pleas Court case, one of the agencies responsible for administering municipal income taxes in Ohio, RITA (Regional Income Tax Agency) has posted the following on its website under the Individual FAQ’s – Refunds section.
FAQ - 10. COVID-19 Work From Home Refund Requests
Am I able to receive a refund of the tax my employer took out for my work city/village while I worked at home due to the COVID-19 pandemic?
This question is being decided in the courts. You can fill out and file a Form 10A to request the refund, and RITA will hold the refund request until a final court decision is made. Make sure to complete the entire form, including checking the box at the top to indicate the request is related to COVID-19, and use Claim Reason Number 2.
How long will it be before the courts make a final decision?
It’s not clear right now when a final ruling will be made. 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)
How will I know when a final court decision has been made?
When a final ruling is made RITA will either issue the refund (if that’s the decision) or notify you that you are not eligible to receive the refund due to the court ruling. You can also check the status of the refund request yourself by setting up an account in MyAccount at ritaohio.com. While we are waiting for the final court ruling the status of your refund in MyAccount will be "SUSPENDED".
A. Remember that even 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. If your residence community is also a RITA member we will transfer the refund to the residence community and only refund to you any difference.
Meaden & Moore will continue to monitor RITA, CCA, the Ohio Department of Taxation, the pending Franklin County case, pending legislation, and other relevant information and will update this blog as further guidance is issued. In the meantime, please contact us with any questions.