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Understanding Your Local Income Tax In Northeastern Ohio

An Online Pamphlet By Frank E. Fogg - Public Accountant

Many communities in the Northeast Ohio area generate revenues from local income taxes. Some have their own tax departments while others belong to regional organizations.

The local income taxes are based on wages and income from trades or businesses. They ignore income from investments and retirement income in most communities. A space is provided on your W-2 form to show your local income. This may be different from the income listed in other spaces on your W-2 when you belong to a deferred compensation or qualified retirement plan, or have other pre-tax deductions for federal or state purposes.

If you have income from a trade or business, the amount that is taxable may be different from the amount shown on your Federal Income Tax Return. Most communities provide either a section on their tax form or a separate form that describes the computation of the tax liability. Contact your local tax authority for more information if you are involved in a trade or business.

Many communities base your tax liability on a combination of the location that you live, the location that the wages were earned, and various reduction or allowance factors. If your income is only from wages and not self employment income, filing early may allow you to use the short form tax computation. List the information on your W-2 form(s) in the spaces provided and return by the due date. The tax department will perform the computation of tax due for you.

In many cases, taxpayers will owe additional estimated taxes due to local income tax. This occurs when the following situations occur:>

  • Your employer did not withhold enough local tax
  • You work and live in different cities and did not request additional 2nd city local withholding

This is not unusual for taxpayers in this area. Complete either the short or long tax forms and mail them to your local tax authority. Most will provide quarterly estimated tax payment forms that can be returned with a check for the amount due.

If you have a refund due, this can be applied to your estimated tax liability for the next tax year.

Keep in mind that the amount of local tax withheld as well as estimated tax payments can be deducted from your Federal Income Tax on Schedule A of Form 1040.


 


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