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Work-from-home tax breaks: potentially good for your wallet, bad for big cities

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Posted at 8:20 PM, Jan 21, 2021

CLEVELAND — As tax season creeps up on Americans, some taxpayers are exploring every avenue to save some money due to the financial strains of the COVID-19 pandemic.

Specifically, some employees who have worked from home since March have asked, “Why am I paying city and regional taxes when I haven’t stepped foot inside the office since March?”

Many companies have elected to keep employees at home while still carrying out their daily responsibilities.

“If you were working out of your house and you weren't allowed to go into your place of employment because of COVID, technically you're working in the city where you live,” CPA Vince Gaudio said.

Gaudio is encouraging his clients to get the most bang for their buck by attempting to earn back some money through residential tax breaks.

“For example, you work in Cleveland and you live in Lakewood,” Gaudio said. “You'd have to file with the tax agency to get that six-month credit that was paid and then re-file with Lakewood showing it as resident wages.”

However, Ward 3 Cleveland City Councilman Kerry McCormack said there’s a catch 22.

“Downtown Cleveland is our core business district,” McCormack said. “It’s the economic heartbeat and produces the economic blood for the entire region.”

McCormack represents Downtown Cleveland, Ohio City, and Tremont and strongly opposes Senate Bill 352, which would change the rules regarding municipal or regional taxes for work-from-home employees.

“These efforts, what they are, is just cheap political ploys to try to curry favor with a certain group of constituents,” McCormack said.

Translated, McCormack said the City of Cleveland would lose out big if employees only paid taxes to the cities in which they live.

“If our downtown core suffers, you had better believe that's not only going to negatively impact the city but it of course will hurt our suburbs within the region,” McCormack said.

Gaudio said any residential tax breaks would require approval from a manager.

“One caveat is your employer has to sign off on this saying, ‘Yes, Jane Smith actually worked from March 1 to September 1 at home in their city and it was these days,’” Gaudio said.

McCormack said the reward of a larger tax return doesn’t outweigh the risk of a potentially crumbling local economy.

“You don't want to give yourself or your company a huge headache by convoluting where you're paying your taxes,” McCormack said. “We have got to see the success of our region as holistic. The well-being of the city helps the suburbs and the strength of the suburbs helps the city.”

Senate Bill 352 is still awaiting approval in the Ohio Senate.

The IRS will not begin accepting federal tax returns until February 12.