OHIO City Locals Taxation Issue

[Former Member]

Hello All,

In a recent audit done by City Of Columbus it was found that my client was not withholding and paying the City of Columbus on all the 401K wages for EEs that are working there. The wage type for all 401K plans is subject to the city tax.

This issue was reported to SAP and they informed us that we needed to change the Tax Combo, etc for WT 2030, the 401K wage type, for processing Class “L” to a new tax model so it would not be considered for the pre-tax processing class and would have the taxes withheld correctly.

We were able to make the changes and the system is taxing the 401K wages correctly for the city, but only if the work tax area and the residence tax area are different. When the residence tax area is the same as the work tax area, SAP only sends 1 record to BSI, the residence tax record, with the reciprocity indicator for taxation. So, BSI never gets the Work Tax Area record which is where the Tax model changes are to affect the 401K wage type. So, these EEs are not being taxed correctly for their 401k plans for the city of Columbus.

We've started with the City of Columbus since they were the ones that audited the client, but the law applies to all the OH city locals so I will have to apply my new tax model to all 700+ OH city locals as well. If I change the taxability model to include the residence tax area as well, then everyone who has residence set up in those tax areas will be withheld for the 401k wages, even if they work in a different tax area. Since we have over 700 city localities for Ohio, this would have to be done for all of them, both residence and work and we would be withholding more taxes than we should from the EE.

Is there any way that we can get the correct taxation for EEs that live and work in the same residence tax area without adding the residence tax areas to the new Taxability Model that is set for only the Work Tax area right now?

EE works and lives in OH5I Columbus.

IT207 IT208

Tax Call is showing incorrect taxation for OH5I. Should be considering new tax model for 401K WT to be taxed

Second EE only works in OH5I and lives in another city

IT207 IT208

Tax Call is showing correct taxation for OH5I.Is considering new tax model for 401K WT to be taxed. Residence Tax for Grove City is giving EE benefit of pre-tax for 401k WT by having a higher amount as tax-free which is correct since the law is not applicable to the residence tax area.

New Tax Model 69 is only set for new Tax Combo of 47 for Work Tax Area not Residence Tax Area-

Tax Combo 47 is set for N on tax type 1

69 Tax model assigned to City of Columbus (OH5I) & Grove City (OH7Z)