Possible Tax Refunds for Ohio Remote Employees

Ohio residents that worked from home in 2021 because of the pandemic may be entitled to a refund of municipal income tax. When COVID-19 struck, employees were often forced to work from home instead of their employer’s office (or principal place of work). In 2020, Ohio passed a temporary provision requiring employers to continue withholding municipal income tax from employees based on their office location even though employees were no longer working at the office.

Effective January 1, 2022, Ohio passed a new law allowing employees to obtain refunds for 2021 based on where they worked during the calendar year. However, the law does not address the withholding issue for 2020 due to pending litigation. Read more here.

For 2021, the difference in municipal income tax rates between an employee’s home and office (principal place of work) may result in a refund opportunity for employees that had local tax withheld at a higher rate – which is often the case for employees that work in Columbus or Cleveland or other high-rate cities but live in a lower rate municipality.

The Regional Income Tax Agency (RITA) which administers the local income tax for hundreds of Ohio municipalities has issued guidance on their website for employees seeking refunds – https://ritaohio.com/Individuals/Home/Refunds. The RITA website has an FAQ on refunds that addresses questions of timing and how to handle refunds from a municipality of employment when additional tax is owed to a municipality of residence.

Individual taxpayers should evaluate their work situations and tax withholding in 2020 and 2021 to determine if a refund is warranted. Those with the greatest opportunity for refund will be employees that worked from home in a low or no tax municipality. Refunds for 2020 will not be processed while litigation is pending, but taxpayers need to file refund claims before the statute of limitations expires (three years from the date tax was due/paid). Please contact HBK’s SALT Advisory group at HBKSalt@hbkcpa.com with questions.