1. Should I include copies of my W-2’s with my RITA return?

Yes.  Please attach a copy of each and every W-2 you were issued to your RITA return.  It is important to attach a copy of each and every W-2 you were issued because often an employer will issue multiple W-2’s that contain different municipal (local) wage and tax information.  Legible photo-copies are acceptable.  In the event copies of your W-2’s are not attached to your return, your return will be considered incomplete and any amounts reported as local tax withheld on your return will not be recognized (which often results in a bill being issued).

  1. What figures should I use from my W-2 to complete my RITA return?

Both Medicare Wages (box 5) and Local Wages, Tips, etc. (usually box 18) on your W-2 statement are used to determine taxable income for RITA.  If all of your W-2 wages were earned in the same taxing municipality, Local Wages (box 18) should be at least equal to Medicare Wages (box 5).  See question #4 in this section if these amounts are not equal and you worked in the same taxing city the entire tax year.  See question #3 in this section if you were issued multiple W-2’s by the same employer because you worked in multiple cities.

Please note that your contributions to retirement plans, annuities, deferred compensation, 401K or individual retirement accounts (IRA’s) are taxable whether or not your W-2 form shows this income as taxable.  These contributions/deferments usually appear in box 12 (see W-2 Box 12 Code Explanations) on your W-2. At the local level, these contributions/deferments are taxable at the time in which they are earned, not received or paid out.

The Local Income Tax box (usually box 19) reports the amount of tax that was withheld for the locality.  The Locality Name box (usually box 20) indicates the city for which the tax has been withheld.  Since W-2 forms vary between employers, the box numbers mentioned may not correspond to your W-2, so check your W-2 carefully.  Additionally, please note that in the event your W-2 employer has chosen to withhold courtesy tax to your city of residence, this residence courtesy tax may appear below the employment city tax in box 19, occasionally in box 14, or on a separate W-2 altogether. 

Important: please DO NOT report school district tax on a RITA return. School district taxes often are reported in box 19 (below the local tax) and are usually designated by a 4-digit code that appears in box 20 (such as SD-2509 or an abbreviated city name with SD, LSD, or CSD).  A school district tax is not a municipal tax. 

Please review these W-2 examples that illustrate different W-2 wage and tax reporting scenarios.  Why not E-File?  It’s fast, easy and FREE!

  1. I have multiple W-2’s showing local tax withheld to various cities.  How do I report all of these amounts on a RITA return?

Employers are required to withhold local taxes from the wages that employees earn while working in any city that has a local tax.  Consequently, employers issue multiple W-2’s because all of the local tax information (local wages earned and local taxes withheld to each city) simply does not fit on a single W-2.

The grand total of all of the Local Wages (usually box 18) reported on all of the W-2’s that the same employer issued to you, should be equal to box 5 (Medicare Wages).  In the event your total local wages are less than the amount reported in box 5, you should report the untaxed amount (the amount of local wages that are not reported as taxable to any employment city) as taxable income to your city of residence on your RITA return.

If you have multiple W-2’s from the same employer or several W-2’s from different employers, RITA strongly recommends that you E-File (a free RITA service) your return.  When you E-File your return, all of employment city tax rates, your residence city credit limit rate, and your residence city tax credit percentage are correctly and automatically applied, thus saving you valuable time and ensuring the accuracy of your return.

In the event you cannot or elect not to E-File your return, please download our Autocalc Individual Tax Form.

  1. I worked the entire tax year in the same city (a 2% tax rate city) and the wages reported in box 5 (Medicare Wages) on my W-2 do not equal the wages reported in box 18 (Local Wages).  Why?

A.)  Your employer or your employer’s payroll service provider may have incorrectly excluded contributions
        made to a deferred compensation or 401K plan (as explained in the preceding question, these
        contributions are taxable at the local level at the time in which they are earned, not received or paid
        out).  If this is the case, please contact your employer and advise them to begin correctly including
        these contributions in your taxable local wages.  While your employer is legally required to withhold
        the correct amount of local tax due to your city of employment, you have the final responsibility to
        ensure that the local tax is correctly withheld or paid.

B.)  Your employer or your employer’s payroll service provider may have been delayed withholding local
        taxes from your wages because you were a new employee or you changed work city locations.

C.)  Your employer or your employer’s payroll service provider simply failed to report all your local taxable
       wages and withhold the correct local tax on those wages.

  1. If I moved during the tax year and was a part-year resident, do I need to indicate all my W-2 income on the RITA return?

If you moved from one RITA member city to another RITA member city during the tax year, you should allocate (split) your taxable income and the taxes withheld on that income between the RITA municipalities in which you lived.  Your allocation should be based on the actual income you earned and the taxes that were withheld on that income for the time you resided in each municipality.

On the other hand, if you resided in a RITA member city for only part of the tax year, you may report only the amount of income earned and taxes withheld while you resided in the RITA member city.  In the event you do not allocate your income and taxes, RITA will make this allocation on your behalf (utilizing the straight-line allocation method explained in the proceeding question).

When filling out the Form 37EZ or Form 37, it is important that all incomes, withholdings, work cities and resident cities are indicated in columns 1 through 5 of the tax return, and column 6 is completed with the dates the wages were earned.  The date of move box needs to be completed with old address, new address, and move date.  This information together determines the pro-rated tax liability.  Note: Forms 37A and 37B cannot be used if you moved during the tax year.

  1. How does RITA allocate income to determine the pro-rated tax liability for part-year residents?

RITA divides the number days that an individual resided in a RITA city by 365 (the total number of days in a tax year) and arrives at an allocation percentage.  This allocation percentage is then applied to the total income earned and the total corresponding local taxes that were withheld (if any taxes were withheld on the W-2).

Example:  A part-year Garfield Heights resident earned $50,000 in W-2 wages while residing in Garfield Heights from January 1 thru May 15 (135 total days).  On May 16, this individual moved to Cleveland (a non-Rita city).  This individual worked in Cuyahoga Heights all of 2006 (from January 1 thru December 31) and had $1,000 in Cuyahoga Heights local tax withheld on the $50,000 in W-2 wages earned in Cuyahoga Heights.  Cuyahoga Heights tax rate of 2% x $50,000 Cuyahoga Heights taxable wages = $1,000 Cuyahoga Heights tax withheld.

The allocation percentage RITA will apply to the above example is calculated as follows: 135 days of Garfield Heights residency/365 days in tax year = .37 (rounded).  Therefore, 37% of this individual’s total W-2 wages earned in Cuyahoga Heights or $18,500 ($50,000 x 37%) are allocated as being earned while the individual resided in Garfield Heights.  Correspondingly, 37% of the local taxes that were withheld to Cuyahoga Heights or $370 ($1,000 x 37%) are allocated as being withheld while the individual resided in Garfield Heights.

See W-2 Example 1C to see the W-2 that was issued for this part-year RITA resident and how this part-year RITA resident correspondingly reported the allocated amounts on a RITA Form 37 Return (Section A).

In this particular example, this individual’s pro-rated tax liability is zero because Garfield Heights residents receive full tax credit (100%) for taxes paid or withheld correctly to all other cities of employment (up to the Garfield Heights credit limit of 2%).  $18,500 (taxable income earned while residing in Garfield Heights) x 2% (tax rate applicable to all Garfield Heights residents) = $370 (this individual’s total local tax obligation on the $18,500 earned while residing in Garfield Heights) - $370 (the amount of local tax withheld to Cuyahoga Heights that is allocated as being withheld while the individual resided in Garfield Heights) = $0 (the amount of this individual’s total pro-rated tax liability attributed to residing in Garfield Heights).

Please note that a city’s tax rate, tax credit, and credit limit can ALL effect the pro-rated tax liability calculation.  For the purpose of simplifying the above example, the cities selected have the same tax rate and credit limit and the RITA resident city (Garfield Heights) has a 100% tax credit.

  1. In addition to my W-2 wages, I have other income (such as 1099-MISC income or Federal Schedule C income) that local tax has not been withheld upon.  Can I request that my W-2 employer withhold additional local tax in excess of the local tax rate?

No.  Withholding by employers in excess of the required tax rate is not permitted.  If an employer has withheld local tax at a rate higher than the statutory rate, the excess amount withheld will be refunded upon written request. Individuals filing with RITA will receive credit only for local taxes in the amount statutorily due to the city where the income is earned.

  1. I was issued a W-2 statement from a third-party insurer for sick-pay or short/long-term disability pay and they did not withhold any local tax.  Is this income taxable and if so, to which city?

The amount that is reported in box 5 (Medicare Wages) is firstly considered taxable to the city of employment to which this income (benefit of employment) is attributed to.  Third-party insurers are not required to withhold local taxes on benefits paid to you as reported on a W-2.  However, employment cities can request and are often supplied with copies of these W-2’s and they may tax you on that income in the event that it is attributed (a direct result of) your employment in that city. 

Consequently, if you are filing a hard-copy RITA return, RITA requires that you attach a copy of the first page of the tax return that you filed with the non-RITA city to your RITA return in order to receive credit for the tax that you paid or reported due to the non-RITA city.

In the event that this taxable W-2 income (benefit of employment) is not attributed to any taxing city of employment or you have elected not to file a return with the attributable city (and attach a copy of that return to your RITA return), then the entire income amount appearing in box 5 (Medicare Wages) should be reported as taxable income to your city of residence and will be taxed at your residence city tax rate.

  1. I was issued a W-2 statement from a former employer for a supplemental employee retirement plan (SERP) distribution.  Is this SERP distribution taxable, and if so to what city(ies)?

This W-2 income is ONLY taxable when it is reported in box 5 (Medicare Wages).  It is firstly taxable to the city in which the related prior employment wages were earned.  As a secondary factor, this income is taxable to your city of residence. The individual should file a return to the city that the prior employment wages were earned in and attach a copy of that city’s return to their RITA return (if a RITA member city resident).  If the prior employment occurred in a non-taxing area and/or the individual has not provided a copy of a return that was filed with the taxing former city of employment, then this W-2 income is considered taxable to the individual’s city of residence.

  1. Are lottery or gambling winnings reported on Form W-2G (Certain Gambling Winnings) taxable?

This income may be taxable to your city of residence.  Please review the Form 37 Special Notes for a list of RITA member cities that consider lottery or gambling winning taxable.

  1. I lost my W-2’s or my employer never mailed me copies of my W-2’s.  How can I get a copy of my W-2’s?

You should contact the employer and request a copy.  You may also contact the State of Ohio at 1-800-282-1780 or the IRS at 1-800-829-1040.

  1. What do all these box 12 codes mean on my W-2?

Summarized from: http://www.irs.gov/instructions/iw2w3/ch01.html

The following list explains the W-2 codes shown in box 12.

C—Taxable cost of group-term life insurance over $50,000 (included in boxes 1, 3 (up to social security wage base), and 5).

D—Elective deferrals to a section 401(k) cash or deferred arrangement. Also includes deferrals under a SIMPLE retirement account that is part of a section 401(k) arrangement.

E—Elective deferrals under a section 403(b) salary reduction agreement.

F—Elective deferrals under a section 408(k)(6) salary reduction SEP.

G—Elective deferrals and employer contributions (including non-elective deferrals) to a section 457(b) deferred compensation plan.

H—Elective deferrals to a section 501(c)(18)(D) tax-exempt organization plan.

J—Nontaxable sick pay (information only, not included in box 1, 3, or 5).

K—20% excise tax on excess golden parachute payments.

L—Substantiated employee business expense reimbursements (nontaxable).

M—Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (former employees only).

N—Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only).

P—Excludable moving expense reimbursements paid directly to employee (not included in boxes 1, 3, or 5).

Q—Nontaxable combat pay.

R—Employer contributions to your Archer MSA.

S—Employee salary reduction contributions under a section 408(p) SIMPLE (not included in box 1).

T—Adoption benefits (not included in box 1

V—Income from exercise of non-statutory stock option(s) (included in boxes 1, 3 (up to social security wage base),and 5).

W—Employer contributions to your Health Savings Account.

Y—Deferrals under a section 409A nonqualified deferred compensation plan.

Z—Income under section 409A on a nonqualified deferred compensation plan. This amount is also included in box 1.

AA—Designated Roth contributions under a section 401(k) plan.

            BB—Designated Roth contributions under a section 403(b) plan.