My local income on my w2 is 150% more than my total income

[jaeygatsby]

A year and a half ago my employer started a flex schedule program. I work at home 3 days per week, and at the office in another city two days per week. I fill out my time card to reflect which city I worked in for each day, and I pay taxes to each city according to the hours I worked in that respective location. However, when I got my w2 for 2022, it reported my local income as if I worked part time at the office and full time at home, so that my total local income was 150% of my actual income, and now I am being forced to pay 150% local taxes. I don't think my w2 is being correctly completed by my employer. If I worked part at the office in one city, and part time at home in another city, and I was taxed for the two cities accordingly, then why is my income not divided the same way? My w2 reports the amount of my income at the office as half of my income, but the amount of my income at home is equal to ALL of my income, so that it looks like I made almost twice as much as I acutally did, and now I am being forced to pay taxes in my home city on more income than I earned there. Does that make sense?

[AnnetteB6]

Your explanation of the situation does make sense.  However, you need to talk to your employer to get a better understanding about whether your W-2 is correct or if you need to request a corrected W-2.

There could be some guidelines or rules to follow based on the localities reported on your W-2 that you do not know.  Also, since one of the localities is also your residence, that could be affecting the amount being reported.  Often places where you live will want to tax you on all income earned, not just income earned in that location.

If you want to share the specific localities you are seeing on your W-2, someone here may have some real-life experience with those and can give you more information.

[jaeygatsby]

My office is in Akron, Ohio, and my work at home is in North Canton, Ohio. These are normally locations that allow reciprocal tax credit, so I have never had to pay taxes in my resident city because what I pay to Akron is more than my resident city taxes. But because of how it appears now, when I tried to file my city taxes, the way the w2 is reporting them, it made it looks like my income was 150% more than it actually is, and therefore raised my taxes more than 150% over what they are for my actual income. Local taxes for my city income should be around 900.00. I have paid 1500.00 between the two cities already, but it is saying I have to pay them another 527.00, because my "income" as reported in that section of my w2 is now almost double what my yearly total income actually is, because of the way the w2 appears, even though my actual total income is NOT that high. I am basically being forced to pay taxes on the same income twice to two cities, even though they have reciprocal tax credit, because my income in that section is shown as 150% higher than what it actually is. What makes no sense is, if my employer is having me report the location for every hour that I work so that they tax them separately according to the hours I work at each location, then they should be doing the same with reporting my income separately according to the hours I work at each location, rather than just doubling it. How can my local income be 150% more than my total income? I am basically being punished for working in two locations - even though they have reciprocal tax credit.

[KrisD15]

There are no reciprocal agreements between cities, but each city gives you a credit for tax paid to another city. 

I don't think the TurboTax program can make that calculation. 

You would have to pay tax on all the income to one city and then all the credit to the other. 

Your employer should know how to handle this. I suggest you claim half the income for each city, that way they both get half the total tax, or file each city by hand, claim all the income on both, then a credit for half the tax for each. The result will be the same, you'll pay 50% of the tax to each city. 

[Hal_Al]

Q.  However, when I got my w2 for 2022, it reported my local income as if I worked part time at the office and full time at home, so that my total local income was 150% of my actual income, and now I am being forced to pay 150% local taxes.

A. No. That's not what's happening.  

Your W-2 is neither right nor wrong, it was just the easy way for your employer to do it.

You have to pay N. Canton tax on all your wages, because you are a resident.  You only pay Akron tax for days you worked there.  Your employer, most likely, withheld to correct amount for Akron and you do not need to file an Akron return.

You file a N. Canton return, reporting all you wage income and then N. Canton gives you a partial credit (1.5% of the 2.5% Akron charges) for the tax paid to Akron. You will probably get a refund from N. Canton. You could ask your employer to withhold less N. Canton tax, but their answer probably is that's too complicated. 

[jaeygatsby]

Unfortunately, North Canton is not giving me the credit for what I paid to Akron. When I complete my tax return on the RITA site, it is telling me I have to pay North Canton another 527.00 .... which makes no sense, as in the past, it was as you are indicating. In the past when I filed North Canton gave me credit for what I paid to Akron. But for some reason, this is not happening. It makes no sense. When I look at my past w2's, my local income was reported differently, and that is why I think that is the problem, and it is now trying to force me to pay double the taxes that I am supposed to be paying according to my income.

[Hal_Al]

N. Canton tax is 1.5%.  Akron is 2.5%. N. Canton will only give you a credit of 1.5%. 

[jaeygatsby]

Yes, but I live in North Canton, not Akron. My tax rate is 1.5%. I have already overpaid my taxes. I owe exactly 1017.00 for my income at 1.5%. I have paid 1500.00 already. I do not owe another 527.00. The problem seems to be that the RITA program to file city taxes is not prepared to handle hybrid work schedules, and is trying to force me to pay double my actual tax bill.

[Hal_Al]

The 1.5% N. Canton tax is applied to all your W-2 income*, not just the time you worked at home.  This is because you are taxed for bring a resident of N. Canton, not for working in N. Canton.  Akron will tax you 2.5%, but only on the days you worked in Akron. N. Canton will give you a 1.5% credit for the tax paid to Akron (for the days worked in Akron).

*Your wages taxable by the city are usually show in box 18 of the W-2 and, for N. Canton,  should be the same as the amount shown in box 5. 

You may have to do the RITA form by hand. 

[jaeygatsby]

You are correct, except that I am not getting ANY tax credit for Akron, because the RITA program cannot figure out that I live in North Canton, and worked in both Akron and North Canton, so it is attempting to tax me the max amount for BOTH. The buttons in RITA are "yes" for "I earned income at this location", or "no" for I did not earn income at this location, I lived there." There are no other buttons for the local income box designations, so I cannot check one to sort out where I lived. The RITA progam is simply not equipped to handle hybrid work schedules, and that is why it thinks I worked at both, lived in neither, and is trying to tax me double my owed taxes for my income. I have tried talking to my employer (who said they will not change my w2), I have tried talking to my resident city (who told me they don't handle tax issues and to deal with RITA), and with RITA, who seemed to have no idea how to handle the problem. They just suggested I mail my things in and let them file my taxes, but frankly, I don't trust them to do it correctly at this point and fix the problem. They should have anticipated this issue two years ago when the work at home tax laws were passed. Hybird work schedules are not unheard of. 

[Hal_Al]

I think you'll find that letting RITA do it is a good option. Especially if your cover letter explains the situation.

Another option is to do it by hand.  Enter the  N. Canton withholding only in Column 3 (resident municipality) not column 2 (workplace municipality).