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Local Tax Questions

Local tax is a type of tax that is levied in addition to federal and state tax typically in the form of property tax. The tax collected is then used in ways to benefit the community in the form of covering the cost of maintaining local parks, roads, garbage pickup and so on. Listed below are a few questions about Local Tax answered by the Experts.

On a 401k withdrawal, does a person need to pay local tax along with their federal and state taxes?

In most cases, a person’s local municipality or county income tax would be calculated based on the person’s total income. Therefore, their 401k withdrawal would be seen as normal taxable income that would be included on their federal and state returns when they file their tax return for the year.

If a person lives in Kansas and pays Kansas state taxes but works in St. Louis and has to pay local tax there, can they get refunds on the local tax?

Typically, the person would not be able to get the local tax paid in St. Louis refunded since it is a local tax and not a state tax. The State of Kansas has a tax rule that says that you can only get refunded on taxes paid to other states and not cities. However, what the person could do is to deduct the amount that they paid as local tax in St. Louis as a work expense on their federal tax return. The person would also have to file an MO non-residential tax return and show all their earnings made in MO if they have made over $600 in earnings from the state. <

A resident of Pennsylvania filed local taxes and paid it in the city where they worked instead of where they lived. They then received a notice that said that they owed more money. Would the tax rate vary from city to city?

In the State of Pennsylvania, local taxes will depend on the district the person lives in. The person would need to send their taxes to the city in which they reside to know the actual amount of local tax that they would need to pay. If the person sent it to the city where they work and the tax rate is different there, the person would be responsible to pay the difference.

I now work in Columbus in the State of Ohio but had previously worked in Reynoldsburg. However, my previous employer in Reynoldsburg deducted local tax at the Columbus tax rate. Is this correct? Am I eligible for a refund?

In the State of Ohio, every municipality levies tax on earnings made by residents and non-residents working in that particular municipality. With regard to your case, you would need to contact the city of Columbus and apply for a refund of the money that you were charged. Once you get the money through the refund, you would need to contact Reynoldsburg and make sure that you pay the local taxes for that city. Local taxes help local governments to pay for things around the city that the community needs such as parks, garbage pickup and other services that the city offers.

When a person pays local taxes, they may have questions regarding what the taxes are for, how the taxes work, or even how to apply the taxes when they pay their state or federal taxes. When these questions arise, put them to a Tax Professional who can offer insights and information to help with the case.
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